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EXHIBIT 8
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Comments Received by the Department of
Consumer and Worker Protection on
Proposed Rules related to Minimum Pay for Food Delivery Service
Workers
IMPORTANT: The information in this document is made available solely to inform the
public about comments submitted to the agency during a rulemaking proceeding and is
not intended to be used for any other purpose
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From: Briane Hatcher
Sent: Wednesday, March 29, 2023 4:47 PM
To: rulecomments (DCWP)
Subject: [EXTERNAL] Please Protect My Flexibility
You don't often get email from briane.hatcher.587652674@p2a.co. Learn why this is important
CAUTION: This email originated from outside of the organization. Do not click links or open attachments unless
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attachment (Click the More button, then forward as attachment).
To The Department of Worker & Consumer Protection:
We’ve said it before and we’ll say it again. Please do not move forward with any new rules that would
force apps to limit when and where I work.
The reason why I choose to work via food-delivery apps is because I enjoy the full flexibility to pick
which days of the week, hours of the day, and parts of the city I work in. I don’t want to compete with
workers for the best time slots and I don’t want to be locked out of apps.
Please listen to workers - don’t force apps to take away my freedom & flexibility.
Regards,
Briane Hatcher
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Pages 3 to 63 Intentionally Omitted
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BEFORE THE NEW YORK CITY DEPARTMENT OF CONSUMER AND WORKER
PROTECTION
Second Proposed Rule on Minimum Pay for Food
Public Hearing: April 7, 2023
Delivery Workers
COMMENTS OF UBER TECHNOLOGIES, INC.
Josh Gold
3 World Trade Center
175 Greenwich Street
New York, NY 10001
Email: jgold@uber.com
INTRODUCTION
The New York City Department of Consumer and Worker Protection (the “Department”) has
published an amended rule to establish minimum payments for food delivery couriers (the “Second
Proposed Rule”), updating a methodology originally set forth in, and responding to public
comments on, a rule proposed in November 2022 (the “First Proposed Rule”). The Second
Proposed Rule sets forth two methodologies by which app-based platforms can satisfy the
requirements of the proposed minimum pay requirement: the “Standard Method” and the
“Alternative Method.”
Uber continues to support reasonable protections for the couriers who deliver goods
using Uber Eats and similar apps. But the Department has failed to adequately consider the impact
of its proposed rule, or even turn over its modeling to commenters despite repeated requests. As
New York courts have recognized, it is “of concern” when an agency relies on economic modeling
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in promulgating rules but fails to disclose that modeling to the public, as it provides an incomplete
record for both the public and the courts to “evaluate the action taken . . . and whether such decision
was rational.” ZEHN-NY LLC v. N.Y.C. Taxi & Limousine Comm’n, No. 159195/2019, 2019 WL
7067072, at *4-5 (N.Y. Sup. Ct. Dec. 23, 2019). Nor has the Department adequately responded to
serious criticisms of the First Proposed Rule, many of which continue to plague the Second
Proposed Rule. Instituting the Second Proposed Rule would result in upheaval of the existing food
delivery ecosystem, presenting significant risks for the restaurant industry, couriers, apps, and
consumers, and likely force apps to engage in “gating & force offline”—i.e., limiting how and
when existing couriers can access their platform based on certain criteria—which will in turn
drastically reduce courier earning opportunities, flexibility, and choice.
Moreover, there are multiple, serious problems with the Department’s selected
methods for implementing its minimum pay rate. Fundamental is the Department’s decision that
couriers must be compensated for all time that they are logged on to apps, even if they are not
actually available or intending to accept an offer. The Standard Method proposes to pay all
couriers, in aggregate, for the total time all couriers are logged into the app. While the Alternative
Method proposes the apps pay couriers only for their trip time using the hourly rate of the Standard
Method and divided by a 60% utilization rate (which is equivalent to multiplying it by 1.67) to
similarly purport to account for all time a courier is logged into the app. This means that for every
60 minutes a courier does deliveries, he or she gets an additional 40 minutes paid at the Standard
Method’s minimum pay rate. But this calculation is based on an estimate of utilization rate that
relies on data that does not account for how apps will react to the implementation of the minimum
pay rate, and in any event is 45% higher than the 1.15 multiplier (based on an 87% utilization rate)
that apps estimate using couriers’ actual working time.
There are a number of issues that the Department should take the necessary time to
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grapple with, and rectify, in order to achieve its goals of increasing courier payments without
causing serious upheaval to the industry.
First, the Department’s reliance on arbitrary assumptions has led to unreliable
impact estimates that understate the adverse impacts of the Second Proposed Rule. These
assumptions include, but are not limited to, the number of completed deliveries per hour that
couriers will make, the elasticity between cost increases and demand, and the impact of the
minimum pay rate on utilization rates or total trip length. These unfounded, and unexplained and
unstated assumptions produce unreliable estimates of the impact of the Rule and even slight
variations to the Department’s assumptions lead to severe consequences including severe cost
increases and reductions in demand of more than 20%, without even disclosing the impact on key
metrics like total trip length, which likewise harms restaurants.
Moreover, the Department has failed to produce the model underlying the Second Proposed Rule,
preventing restaurants, platforms, and couriers from fully understanding the significant changes to
the industry that the Second Proposed Rule will cause. The model’s projected outcomes are poorly
explained and cannot be replicated, depriving parties from fully participating in the rulemaking
process. What the Department has produced—just days before the April 7 public hearing—
contains incomplete code underlying the First Proposed Rule, presented in an unnecessarily
complicated fashion and without explanation or documentation. By failing to disclose its recent
modeling and the inputs and outputs into its model, and given what it has produced is incomplete,
the Department prevents the public, and courts, from evaluating whether the decision to
promulgate the Second Proposed Rule was rational. Additionally, the Department’s assumptions
minimize the predicted adverse impacts of the Rule. The Department is gambling on the future of
New York’s restaurant industry. If those unsupported assumptions are incorrect, the adverse
impacts of the Second Proposed Rule may be much larger than the Department suggests and may
be devastating to couriers, customers, restaurants, and apps.
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Second, the minimum pay rate under the Alternative Method depends on an
arbitrary and inadequately explained utilization rate assumption of 60%. The data relied on to
support that assumed figure does not reflect the impact of the Rule itself and is outdated.
Moreover, the Department’s 60% assumption completely ignores data from Relay—the app whose
business model is most similar to how apps’ models will change if the Second Proposed Rule is
enacted. Any assumptions about what utilization rates will look like under the model for worker
pay should appropriately account for the critical data from Relay. In fact, since Relay is the only
app the Department sought data from that optimized for utilization during the period in which data
was collected, the Department should rely solely on Relay’s utilization rate.
Commenters previously explained to Uber that a 1.15 multiplier (representing an 87% utilization
rate) better approximates the true working time of couriers and would therefore significantly
reduce (or eliminate) the possibility that apps will be incentivized to use tools such as gating after
the rule is implemented. The Department should adopt the proposed 1.15 pay multiplier, or, in the
alternative, adopt something between that and the 60% utilization rate it has proposed (essentially
a 1.67 multiplier) which will allow couriers to retain flexibility and not force apps to enforce
extreme gating tactics.
Third, the Department should not mandate that apps use the Standard Method as a
penalty to the extent a platform does not meet the utilization floor. The Second Proposed Rule
allows apps to use the Alternative Method only if they maintain a 53% utilization rate on a
payperiod (weekly) basis, thus penalizing apps that fall under this floor by mandating payments
under the Standard Method. Instead of this penalty, the Department should amend the Rule to
require an app that falls below the utilization rate floor to suspend giving new couriers access until
the floor is achieved. This will protect existing and more tenured couriers from devaluing of the
earning standard, encourage efficiency, and reduce the need for restricting existing couriers’ access
to work when and where they want.
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Fourth, eligibility to use the Alternative Method should be determined based on a
month-long assessment period, rather than the pay-period’s one week basis. Given the high
volatility of utilization rates throughout the week, a one week “lookback” period is unreasonable,
administratively burdensome, and provides apps with little ability to manage this volatility of
utilization rates, which may result in apps gating more than is necessary, to the detriment of
couriers.
Fifth, the Standard Method and minimum pay rate are flawed in multiple ways. The requirement
to pay couriers (in the aggregate) for all on-call time ignores the reality that couriers can decline
offers at will (and make thorough use of this freedom) and threatens couriers’ ability to do so if
the apps are constrained to respond by gating or otherwise limiting access to couriers who reject
trips. In fact, the Department’s own study showed that while apps send couriers an offer every 4
minutes on average, couriers only accept an offer every 11 minutes – thus, turning down almost 3
offers before they choose to accept one. Proposing a method designed to restrict couriers’ freedom
directly conflicts with the New York City Council’s policy choices that support courier flexibility,
enabling couriers to set personalized maximum trip distances or restrict the bridges or tunnels they
are willing to traverse. Further, the Minimum Pay Rate arbitrarily includes amounts for workers’
compensation that the Department admits will not be used by couriers to purchase such insurance.
Sixth, the Department should implement the phase-in schedule as proposed
originally in the First Proposed Rule (which starts at 75%) instead of using the aggressively
accelerated phase-in schedule that starts at 90% of the full minimum pay rate. The Department
has not explained why it made this change beyond generally referencing comments that
complained the rulemaking implementation was too slow (and without acknowledging
commenters who believed the phase-in proposal was too fast, or was appropriate). The Department
should revert to the Commission’s original phase-in schedule of 75%, 85%, and 100%, or, in the
alternative, instead adopt a more reasonable schedule with rate increases representing 80%, 90%,
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and 100% of the minimum pay rate in 2023, 2024, and 2025, respectively. The potential harms of
the Rule are too great to gamble on an immediate 90% starting point.
Seventh, the Department has failed to meaningfully respond to comments
criticizing its use of unreliable survey data, further reflecting the arbitrary nature of its rulemaking
process.
Eighth, the proposed recordkeeping requirements are invasive, confiscatory and
burdensome for apps. Moreover, the Department has failed to articulate how these requirements
serve the Department’s calculation of minimum pay rates.
Finally, Uber reiterates and incorporates by reference the comments it has already
submitted, and draws the Department’s attention to previous issues that it has failed to adequately
respond to.
BACKGROUND
The Second Proposed Rule allows for a “Standard Method” and an “Alternative
Method.” Under the Standard Method, apps must meet two separate requirements. First, under the
“Individual Pay Requirement,” apps must pay each worker an amount at least equal to that
worker’s total trip time during that week multiplied by the minimum pay rate (“MPR”) set forth in
the rule.1 Second, each app’s total payments to all delivery workers that use its app (“couriers”)
must equal the sum of all of their total trip time and on-call time during a pay period, multiplied
by the minimum pay rate (“Aggregate Pay Requirement”). 2 The Second Proposed Rule does not
mandate how Aggregate Pay is paid out and thus leaves Apps discretion to determine which
couriers receive money for on-call time and in what amount, so long as the total amount required
is transferred.
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Under the Alternative Method, apps must pay each worker an amount at least equal
to that workers’ total trip time multiplied by the alternative minimum pay rate—calculated by
dividing the MPR by 60%. The 60% figure is what the Department contends is a reflection of the
average utilization rate among Uber Eats, Grubhub, and DoorDash from January 2021 through
June 2022.
1
Ex. 1, Second Proposed Rule at 4.
2
Id. As defined in the Second Proposed Rule, “trip time” means “the span of time between the moment a food delivery
worker accepts an offer from a third-party food delivery service or third-party courier service to perform a trip with a
pickup or drop-off location in New York City, or receives an assignment to perform such a trip, through the moment
such a trip is completed or canceled,” and “on-call time” means “the time a food delivery worker is connected to a
third-party food delivery service or third-party courier service’s electronic system for arranging or monitoring trips in
a status where the food delivery worker is available to receive or accept trip offers or assignments with a pickup or
drop-off location in New York City and excludes all trip time.” Id. § 7-803(a)(4), (7).
As of April 2024, an app may only apply the Alternative Method if it has a
utilization rate (or “UR”) of at least 53% for the week-long pay period in which the method is
applied. The Department states that it bases this 53% floor by subtracting the “standard deviation
of 7%” that the “median app” had in its weekly utilization rate from the 60% average. 3
I. The Department’s Impact Estimates Are Unreliable
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The Department relies on a number of arbitrary and cherry-picked assumptions in
the Second Proposed Rule that are unsupported and understate the adverse impacts it will have on
merchants and consumers. This includes, but is not limited to, assumptions about the number of
deliveries per hour that couriers will make following implementation of the rule, costs to
consumers, impacts on demand, and utilization rates. These unfounded and unexplained
assumptions produce unreliable estimates of the impact the Second Proposed Rule will have.
As an initial matter, the Department has failed to produce the model underlying the Second
Proposed Rule and the Department’s decision-making. Uber first requested this model under the
Freedom of Information Law over four months ago. 4 The Department failed to produce the model
and other requested materials in the original comment period, depriving commenters of the
opportunity to verify and meaningfully comment on the Department’s expectations of the impact
of the Rule on the industry. Uber recently reiterated its request for these materials as they relate
to the Second Proposed Rule.5 The Department finally produced an incomplete form of its
3
Id. at 12.
4
Ex. 2, FOIL Request (Nov. 29, 2022).
5
Ex. 3, FOIL Request (Mar. 24, 2023).
modeling on April 3, 2023—just days before the Department’s public hearing on the Second
Proposed Rule. However, the files it produced contain code written in the language “R” and lack
any explanation or documentation. Moreover, the documents all seem to relate to the First
Proposed Rule, as the files are dated October 2022 and use the previous pay rates.
Regardless, this appears to be an incomplete collection of the calculations
underlying the Report and does not include numerous other categories of documents requested by
Uber. Notwithstanding those requests, the Department unilaterally extended its deadline to
respond to Uber’s FOIL request to June 30, 2023, “due to the volume and complexity of records”
that are potentially responsive.6 Given the volume of remaining documents the Department has
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not produced regarding the First Proposed Rule, let alone the production of no documents in
response to Uber’s additional FOIL request for documents relating to the Second Proposed Rule,
the Department has deprived commenters of the ability to meaningfully comment on its modeling
and the impact of the minimum pay rate.
The Department’s statement that it “reviewed its impact model and assumptions in
light of criticisms raised in comments but found that no changes were warranted” 7 is ipse dixit.
This falls flat when no commenters were able to actually critique the model itself, leaving
merchants, platforms, and couriers unable to fully understand, comment on, or even verify the
significant changes to the industry that the Department’s Rule will cause. Moreover, as New York
courts have recognized, failing to provide the modeling “relied on” in promulgating a rule leaves
6
Ex. 4, Email from Records NYC to K. Dunn (Apr. 3, 2023). Delaying production of the requested key
materials for six months is certainly not “reasonable under the circumstances of the request” as required by New
York law, N.Y. Pub. Officers L. § 89(a)(3), particularly given the coming vote on the proposed rule. And the
Department’s reasoning is backwards; the more “voluminous” and “complex” the Department’s modeling and
assumptions are, the more the Department needs to disclose them to the public sufficiently in advance of passing a
rule with such sweeping risks.
7
Ex. 1, Second Proposed Rule at 15.
courts without “a record to evaluate the actions taken by the [Department] and whether such
decision was rational.” ZEHN-NY, 2019 WL 7067072, at *4-5.
Moreover, the assumptions the Department does make are arbitrary, unfounded,
and unsubstantiated. For instance, to model the Second Proposed Rule, the Department assumes
that apps will achieve a 60% utilization rate “consistent with the incentives under the alternative
method.”8 The Department does not set forth a basis for this assumption and no such basis is
apparent. Moreover, if apps do not meet the 60% utilization rate figure that the Department
assumes, the impact estimates are in fact overstated in terms of courier earnings, spending on app
delivery, and total deliveries.
The Department has also been inconsistent in its calculations, assumptions, and
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projections of deliveries per hour. The Department published a purported study concurrently with
the First Proposed Rule titled, “A Minimum Pay Rate for App-Based Restaurant Delivery Workers
in NYC” (the “Report”). In the Report, the Department published a table showing the average
courier deliveries per hour for the fourth quarter of 2021 based on different modes of
transportation, the weighted average (based on the percentage of deliveries) of which is equal to
1.70 deliveries per hour.9 Yet in discussing the model measuring the impact of the minimum pay
rate, the Department stated that current courier deliveries per hour is 1.63—with no explanation as
to why these figures were different.10 Additionally, the Department initially assumed in its model
measuring the impact of the minimum pay rate that courier deliveries per hour will increase to
2.50.11 It also stated that it “projected [a] 51% increase in deliveries per hour,” 12 which (using the
8
Id. at 16.
9
Ex. 5, Report at 14, Table 3.
10
See id. at 34.
11 Id.
12
Id. at 35.
1.63 rate as a base) would be 2.45 deliveries per hour, not 2.50. Nor does the Department explain
how it determined its 51% projected increase, simply stating that it expects that “the less efficient
apps will increase . . . but not fully match the highest rate of deliveries per hour the Department
has observed for an app.”13
Now, in the Second Proposed Rule, the Department’s projected outcomes assume
that apps will average 1.94 deliveries per hour.14 But it has not explained how it determined this
figure, or why it differs from the 2.50 assumption used in the Report and the First Proposed Rule,
or how the increases will be achieved—such as in what part of the increase is caused by reducing
waiting time and what amount of the increased is caused by limiting trip length, to the detriment
of restaurants and consumers.
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The deliveries per hour figure, which the Department has changed numerous times
without explanation, is critical. The number of deliveries per hour that occur will determine the
incremental costs of deliveries that will be passed on to consumers, and thus directly impacts how
much the increased fees will decrease merchant orders and revenues. The Department already
assumes significant loss of merchant orders and revenues, and in fact the impacts may be even
greater, but the public cannot assess that without an explanation of how the Department derived
these figures or the model. If the Department’s unsupported predictions are incorrect, the impact
on consumer costs and demands may be devastating.
In fact, Table 3 from the Second Proposed Rule presents a number of questions and
cannot be replicated based on the limited information that has been disclosed. For instance, the
Department has not explained how it determined that couriers would earn $23.56 per hour on
13
Id. at 34.
14
Ex. 1, Second Proposed Rule at 16.
average when it expects three companies to operate under the Alternative Method and one
company to operate under the Standard Method. It also entirely omits the Department’s
calculations for the years 2023 and 2024, a time period during which the minimum pay rate will
be implemented and consumers, restaurants, and couriers will be required to adapt to it. This type
of rulemaking in the dark flies in the face of the public notice and comment system, depriving
participants and affected parties from fully participating in the rulemaking process.
Additionally, the Department has not even attempted to address previous comments
from apps and others regarding the Proposed Rule’s impacts on demand, costs per trip, and total
trip length, or its dependence on flawed survey data. For instance, Uber previously explained the
flaws in the Department’s assumption that deliveries would increase from 1.63 per hour to 2.50
per hour, despite acknowledging that demand may go down by 15.6% due to an increase in costs. 15
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Following this critique, the Department lowered its assumption to apps averaging 1.94 deliveries
per hour, as discussed above, but did not explain why it did so, how it got that figure, or if its
reduction was in response to Uber’s comment or something else.16
Even if the Department were correct in making this assumption, it ignores the
reality that deliveries would increase at a much greater rate if not for the policies imposed via the
rulemaking. Simply taking one previously unjustified assumption (increases in deliveries to 2.50
per hour) and replacing it with another unjustified assumption (increases in deliveries to only 1.94
per hour) does not reflect reasoned rulemaking, and in any event reflects the Department’s failure
to focus on what growth would have been in the absence of the rulemaking. Such arbitrary changes
to an assumption in response to a critique does not reflect reasoned rulemaking.
15
Ex. 6, Uber’s December 15, 2022 Comment at 2.
16
This difference is not explained by the Department’s accounting of multi-apping either, as it determined that couriers
will average 2.29 deliveries per hour after accounting for multi-apping. Ex. 1, Second Proposed Rule at 16.
Nor did the Department even respond to Uber’s comment that costs per trip will
increase significantly, likely leading to greater reductions in orders placed with restaurants, if apps
are unable to achieve a sustained average of 2.5, or 1.94, deliveries per hour. 17 For instance, as
Uber estimated at the time, if apps were only able to increase deliveries per hour to 2.05, demand
would have been expected to drop by 22.0%.18 Yet faced with this information, the Department
did not respond other than to say that it does not believe it needs to revise its assumptions. 19 In
fact, the Second Proposed Rule references demand only twice. When faced with this evidence that
the drop in demand may be greater than estimated and have drastic consequences, the Department
instead chose to hide their findings. Couriers, merchants, apps, consumers, and the courts are
entitled under the law to understand the Department’s explanation and reasoning, especially when
the potential consequences are so significant.
The Second Proposed Rule contains the same risks. Even at the Department’s
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arbitrary and unexplained assumptions of deliveries per hour at 1.94, and elasticity, cost per
delivery would immediately increase by $4.91 in 2023, with apps facing a 14.8% reduction in
demand, which harms restaurants.20 These impacts would increase to $5.94 cost increases and a
17.9% reduction in demand by 2025, without even accounting for inflation adjustments. And the
Department has not adequately considered or explained the ramifications if either of these critical
assumptions is wrong, such as through a sensitivity analysis. For instance, if the Department’s
arbitrary assumptions are correct except productivity stays at current levels, the immediate cost
increase in 2023 would be $6.67 per delivery, resulting in an over 20% decrease in orders.
17
Ex. 6, Uber’s December 15, 2022 Comment at 2-3.
18
Id. at 3.
19
See Ex. 1, Second Proposed Rule at 15.
20
At a utilization rate of 60%, the Standard and Alternative Methods have identical impacts.
Impact of Pay Per Trip Requirement Under the Standard and Alternative Method 1
(utilization rate of 60%, elasticity of 1)
2023 ($17.76 p/h) 2024 ($18.96 p/h) 2025 ($19.96 p/h)
Productivity Added Added Added
(Deliveries Cost Per Cost Per Cost Per
% Δ in % Δ in
Per Hour) Delivery Delivery Delivery
Orders Orders % Δ in Orders
1.94* $4.91 -14.8% $5.42 -16.4% $5.94 -17.9%
1.87 $5.26 -15.9% $5.79 -17.5% $6.32 -19.1%
1.81 $5.58 -16.8% $6.13 -18.5% $6.68 -20.2%
1.75 $5.92 -17.9% $6.49 -19.6% $7.06 -21.3%
1.69 $6.28 -19.0% $6.87 -20.8% $7.46 -22.5%
1.63** $6.67 -20.2% $7.28 -22.0% $7.90 -23.9%
1
* 1.94 deliveries per hour is the Department’s productivity assumption for apps from the Second Proposed Rule. **
1.63 deliveries per hour is the Department’s calculation of current productivity.
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The impacts on demand would be even greater if the Department’s unexplained
elasticity assumptions are incorrect as well. For example, if all of the Department’s assumptions
are correct except that elasticity is in fact 1.5, demand would drop by 26.9% based on the 2025
rates, 9 percentage points greater than under the Department’s assumptions.
Impact of Pay Per Trip Requirement Under the Standard and Alternative Method
(minimum pay of $19.96 p/h, utilization rate of 60%)
Elasticity = 1 Elasticity = 1.5 Elasticity = 2
Productivity Added Cost
(Deliveries Per Hour) per Delivery % Δ in Orders % Δ in Orders % Δ in Orders
1.94* $5.94 -17.9% -26.9% -35.9%
1.87 $6.32 -19.1% -28.7% -38.2%
1.81 $6.68 -20.2% -30.3% -40.4%
1.75 $7.06 -21.3% -32.0% -42.6%
1.69 $7.46 -22.5% -33.8% -45.1%
1.63** $7.90 -23.9% -35.8% -47.7%
Nor did the Department properly consider the impact of the MPR should apps fail
to achieve the arbitrary assumption that they will reach 60% utilization. For instance, even if an
app achieves a utilization rate of 56.5%, such that the alternative method is available to that app,
but productivity does not change (for example, by having longer trips), apps would still see a $7.18
increase in delivery costs and would expect a 21.7% reduction in demand, which would harm
restaurants.
Impact of Pay Per Trip Requirement Under the Alternative Method
(minimum pay of $19.96 p/h, elasticity of 1)
UR = 53.0% UR = 56.5% UR = 60.0%
Productivity Added Added Added
(Deliveries Cost Per Cost Per Cost Per
% Δ in % Δ in % Δ in
Per Hour) Delivery Delivery Delivery
Orders Orders Orders
1.94* $4.74 -14.3% $5.34 -16.1% $5.94 -17.9%
1.87 $5.08 -15.3% $5.70 -17.2% $6.32 -19.1%
1.81 $5.39 -16.3% $6.03 -18.2% $6.68 -20.2%
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1.75 $5.73 -17.3% $6.39 -19.3% $7.06 -21.3%
1.69 $6.08 -18.4% $6.77 -20.5% $7.46 -22.5%
1.63** $6.47 -19.5% $7.18 -21.7% $7.90 -23.9%
The Department’s failure to consider such an array of outcomes or adjust its models
based on these factors reflects the arbitrary nature of its rulemaking process, and the risk it is
imposing on New York restaurants. Just as importantly, the Department has not disclosed the
impact on other key outputs under its modeling, including total trip length and distance which
directly relate to courier preferences and flexibility, as well as merchant revenues.
In addition, the Department recognized “that app-based delivery is less costly to
provide where there are high order volumes and short trip distances,” but the Department failed to
analyze the effects of the minimum pay rate’s impact on total trip length. 22 As the Department
seemingly recognizes, the Second Proposed Rule provides a strong incentive to shorten total length
in order to increase the amount of deliveries per hour and spread the increased costs per hour across
multiple customers. To achieve this goal, apps will be forced to reduce the maximum delivery
radius, thereby limiting consumer choice and shrinking the potential customer pool for restaurants.
But the Department may have not even considered these harmful effects, but it has not disclosed
its analysis or explained why they may be acceptable.
II. The Pay Rate Under the Alternative Method Is Arbitrary
Uber Eats welcomes the addition in the Second Proposed Rule of the Alternative Method, in that
it provides for payment only for time spent on trip. However, the decision to set the alternative
method rate at the MPR/.60 is arbitrary. The Department should reevaluate the Alternative Method
Rate and calculate it by using a utilization figure of around 87%.
The Department provides its 60% utilization rate figure “reflects” the “average
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weekly utilization rate from January 2021 through June 30, 2022 for Uber Eats, Grubhub, and
DoorDash, combined. This means that across this 18-month period, in the average week, workers
at these apps were engaged in trip time 60% of the time and on-call time 40% of the time.” As a
starting point, the Department's selection of 60% and its explanation are arbitrary and insufficient.
The Department does not adequately explain why the time period it selected is appropriate, as
opposed to a more recent period of data reflecting current trends, what the outcome would be
during other options, or in what sense the “average week” was average.
The Department also in making its calculations excluded data from Relay. Relay
is the app with the highest utilization, and thus its exclusion from the data set appears results
22
Ex. 1, Second Proposed Rule at 16.
oriented. And, Relay is the app whose business model may have more similarities to how the app’s
model will change if the Rule is enacted, making the exclusion of Relay data arbitrary. Currently,
Relay is the only app that directly compensates couriers for on-call time, as will be the case
following implementation of the minimum pay rate, and engages in the extensive type of gating
practices that could result following implementation of the minimum pay rate. Yet, the
Department excluded Relay from its measurement of average utilization rates. In other words, the
Department excluded from calculations, for purposes of setting rates in the future, the app behaving
most like apps may have to behave like in the future. If anything, the Department should have
only considered Relay in assessing apps’ future utilization given the expected changes in behavior.
Thus, the Department has failed to adequately consider the impact of its rule and engaged in
arbitrary rulemaking. The Department should have included data from Relay.
The Department’s use of a utilization rate of 60% to calculate the hourly rate under the Alternative
Method is also arbitrary and flawed because it includes on-call time that should be excluded.
Couriers, as independent contractors, are empowered to accept or reject trip offers based on
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personal preferences (or may simply have an app open for hours on end with no intention of
completing any trips). The Department’s proposal fails to recognize courier prerogative to accept
or reject trips, including based on whatever factors may motivate a courier at a particular moment
in time. Because couriers’ freedom of choice reduces utilization rate for factors beyond the control
of the platforms, making a minimum pay rate based on all on-call time is flawed.
The Alternative Method’s use of a multiplier on the standard MPR is similar in
some ways at a very basic level to previous proposals submitted by Uber and other apps in response
to the First Proposed Rule. Commenters proposed indexing to the time between completion of a
trip and receipt of the next offer while not including the time between offers in “on-call time” if
the courier rejects the latest offer, as well as excluding the time a courier is logged onto an app
before their first delivery and after their last delivery, provided a more accurate representation of
time for which couriers should be compensated.23 In particular, Uber proposed that the Department
use a 1.15 multiplier to the minimum pay rate for each trip (achieving the same effect as using an
87% utilization rate). Uber calculated this multiplier based on the average length of time that a
courier waited before accepting an offer divided by the average trip duration. 24 This proposal
accurately accounted for the fact that many couriers may be engaged in some other nondelivery
activity, or simply exercising the freedom and choice couriers have, and which the City Council
sought to expand with a package of laws that gave couriers more control and information about
each delivery they take.
The Department rejected Uber’s and other recommendations, instead calculating
the Alternative payment rate based on a utilization rate of 60%, which includes time when couriers
are not accepting multiple offers. The Department appears to have based its decision on the view
that couriers decline offers because apps are making low-paying offers. 25 In reality there are many
reasons couriers reject trips (with no penalty to them)—including couriers being busy delivering
for other apps, couriers not ready and willing to work in that moment, courier preferences about
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delivery distance and route,26 market dynamics, and perhaps for no reason at all other than the
courier’s mood at the time. The Department did not ask couriers their reasons for rejecting trips
in its survey, and thus lacks a complete understanding why couriers reject trips, let alone assume
it is due to below-market offers.
23
Ex. 7, Uber’s December 8, 2022 Comment.
Preview
FILED: NEW YORK COUNTY CLERK 07/06/2023 11:59 AM INDEX NO. 155947/2023 NYSCEF DOC. NO. 12 RECEIVED NYSCEF: 07/06/2023 EXHIBIT 8 FILED: NEW YORK COUNTY CLERK 07/06/2023 11:59 AM INDEX NO. 155947/2023 NYSCEF DOC. NO. 12 RECEIVED NYSCEF: 07/06/2023 Comments Received by the Department of Consumer and Worker Protection on Proposed Rules related to Minimum Pay for Food Delivery Service Workers IMPORTANT: The information in this document is made available solely to inform the public about comments submitted to the agency during a rulemaking proceeding and is not intended to be used for any other purpose 1 FILED: NEW YORK COUNTY CLERK 07/06/2023 11:59 AM INDEX NO. 155947/2023 NYSCEF DOC. NO. 12 RECEIVED NYSCEF: 07/06/2023 From: Briane Hatcher Sent: Wednesday, March 29, 2023 4:47 PM To: rulecomments (DCWP) Subject: [EXTERNAL] Please Protect My Flexibility You don't often get email from briane.hatcher.587652674@p2a.co. Learn why this is important CAUTION: This email originated from outside of the organization. Do not click links or open attachments unless you recognize the sender and know the content is safe. Forward suspect email to phish@oti.nyc.gov as an attachment (Click the More button, then forward as attachment). To The Department of Worker & Consumer Protection: We’ve said it before and we’ll say it again. Please do not move forward with any new rules that would force apps to limit when and where I work. The reason why I choose to work via food-delivery apps is because I enjoy the full flexibility to pick which days of the week, hours of the day, and parts of the city I work in. I don’t want to compete with workers for the best time slots and I don’t want to be locked out of apps. Please listen to workers - don’t force apps to take away my freedom & flexibility. Regards, Briane Hatcher 2 FILED: NEW YORK COUNTY CLERK 07/06/2023 11:59 AM INDEX NO. 155947/2023 NYSCEF DOC. NO. 12 RECEIVED NYSCEF: 07/06/2023 Pages 3 to 63 Intentionally Omitted FILED: NEW YORK COUNTY CLERK 07/06/2023 11:59 AM INDEX NO. 155947/2023 NYSCEF DOC. NO. 12 RECEIVED NYSCEF: 07/06/2023 BEFORE THE NEW YORK CITY DEPARTMENT OF CONSUMER AND WORKER PROTECTION Second Proposed Rule on Minimum Pay for Food Public Hearing: April 7, 2023 Delivery Workers COMMENTS OF UBER TECHNOLOGIES, INC. Josh Gold 3 World Trade Center 175 Greenwich Street New York, NY 10001 Email: jgold@uber.com INTRODUCTION The New York City Department of Consumer and Worker Protection (the “Department”) has published an amended rule to establish minimum payments for food delivery couriers (the “Second Proposed Rule”), updating a methodology originally set forth in, and responding to public comments on, a rule proposed in November 2022 (the “First Proposed Rule”). The Second Proposed Rule sets forth two methodologies by which app-based platforms can satisfy the requirements of the proposed minimum pay requirement: the “Standard Method” and the “Alternative Method.” Uber continues to support reasonable protections for the couriers who deliver goods using Uber Eats and similar apps. But the Department has failed to adequately consider the impact of its proposed rule, or even turn over its modeling to commenters despite repeated requests. As New York courts have recognized, it is “of concern” when an agency relies on economic modeling 64 FILED: NEW YORK COUNTY CLERK 07/06/2023 11:59 AM INDEX NO. 155947/2023 NYSCEF DOC. NO. 12 RECEIVED NYSCEF: 07/06/2023 in promulgating rules but fails to disclose that modeling to the public, as it provides an incomplete record for both the public and the courts to “evaluate the action taken . . . and whether such decision was rational.” ZEHN-NY LLC v. N.Y.C. Taxi & Limousine Comm’n, No. 159195/2019, 2019 WL 7067072, at *4-5 (N.Y. Sup. Ct. Dec. 23, 2019). Nor has the Department adequately responded to serious criticisms of the First Proposed Rule, many of which continue to plague the Second Proposed Rule. Instituting the Second Proposed Rule would result in upheaval of the existing food delivery ecosystem, presenting significant risks for the restaurant industry, couriers, apps, and consumers, and likely force apps to engage in “gating & force offline”—i.e., limiting how and when existing couriers can access their platform based on certain criteria—which will in turn drastically reduce courier earning opportunities, flexibility, and choice. Moreover, there are multiple, serious problems with the Department’s selected methods for implementing its minimum pay rate. Fundamental is the Department’s decision that couriers must be compensated for all time that they are logged on to apps, even if they are not actually available or intending to accept an offer. The Standard Method proposes to pay all couriers, in aggregate, for the total time all couriers are logged into the app. While the Alternative Method proposes the apps pay couriers only for their trip time using the hourly rate of the Standard Method and divided by a 60% utilization rate (which is equivalent to multiplying it by 1.67) to similarly purport to account for all time a courier is logged into the app. This means that for every 60 minutes a courier does deliveries, he or she gets an additional 40 minutes paid at the Standard Method’s minimum pay rate. But this calculation is based on an estimate of utilization rate that relies on data that does not account for how apps will react to the implementation of the minimum pay rate, and in any event is 45% higher than the 1.15 multiplier (based on an 87% utilization rate) that apps estimate using couriers’ actual working time. There are a number of issues that the Department should take the necessary time to 65 FILED: NEW YORK COUNTY CLERK 07/06/2023 11:59 AM INDEX NO. 155947/2023 NYSCEF DOC. NO. 12 RECEIVED NYSCEF: 07/06/2023 grapple with, and rectify, in order to achieve its goals of increasing courier payments without causing serious upheaval to the industry. First, the Department’s reliance on arbitrary assumptions has led to unreliable impact estimates that understate the adverse impacts of the Second Proposed Rule. These assumptions include, but are not limited to, the number of completed deliveries per hour that couriers will make, the elasticity between cost increases and demand, and the impact of the minimum pay rate on utilization rates or total trip length. These unfounded, and unexplained and unstated assumptions produce unreliable estimates of the impact of the Rule and even slight variations to the Department’s assumptions lead to severe consequences including severe cost increases and reductions in demand of more than 20%, without even disclosing the impact on key metrics like total trip length, which likewise harms restaurants. Moreover, the Department has failed to produce the model underlying the Second Proposed Rule, preventing restaurants, platforms, and couriers from fully understanding the significant changes to the industry that the Second Proposed Rule will cause. The model’s projected outcomes are poorly explained and cannot be replicated, depriving parties from fully participating in the rulemaking process. What the Department has produced—just days before the April 7 public hearing— contains incomplete code underlying the First Proposed Rule, presented in an unnecessarily complicated fashion and without explanation or documentation. By failing to disclose its recent modeling and the inputs and outputs into its model, and given what it has produced is incomplete, the Department prevents the public, and courts, from evaluating whether the decision to promulgate the Second Proposed Rule was rational. Additionally, the Department’s assumptions minimize the predicted adverse impacts of the Rule. The Department is gambling on the future of New York’s restaurant industry. If those unsupported assumptions are incorrect, the adverse impacts of the Second Proposed Rule may be much larger than the Department suggests and may be devastating to couriers, customers, restaurants, and apps. 66 FILED: NEW YORK COUNTY CLERK 07/06/2023 11:59 AM INDEX NO. 155947/2023 NYSCEF DOC. NO. 12 RECEIVED NYSCEF: 07/06/2023 Second, the minimum pay rate under the Alternative Method depends on an arbitrary and inadequately explained utilization rate assumption of 60%. The data relied on to support that assumed figure does not reflect the impact of the Rule itself and is outdated. Moreover, the Department’s 60% assumption completely ignores data from Relay—the app whose business model is most similar to how apps’ models will change if the Second Proposed Rule is enacted. Any assumptions about what utilization rates will look like under the model for worker pay should appropriately account for the critical data from Relay. In fact, since Relay is the only app the Department sought data from that optimized for utilization during the period in which data was collected, the Department should rely solely on Relay’s utilization rate. Commenters previously explained to Uber that a 1.15 multiplier (representing an 87% utilization rate) better approximates the true working time of couriers and would therefore significantly reduce (or eliminate) the possibility that apps will be incentivized to use tools such as gating after the rule is implemented. The Department should adopt the proposed 1.15 pay multiplier, or, in the alternative, adopt something between that and the 60% utilization rate it has proposed (essentially a 1.67 multiplier) which will allow couriers to retain flexibility and not force apps to enforce extreme gating tactics. Third, the Department should not mandate that apps use the Standard Method as a penalty to the extent a platform does not meet the utilization floor. The Second Proposed Rule allows apps to use the Alternative Method only if they maintain a 53% utilization rate on a payperiod (weekly) basis, thus penalizing apps that fall under this floor by mandating payments under the Standard Method. Instead of this penalty, the Department should amend the Rule to require an app that falls below the utilization rate floor to suspend giving new couriers access until the floor is achieved. This will protect existing and more tenured couriers from devaluing of the earning standard, encourage efficiency, and reduce the need for restricting existing couriers’ access to work when and where they want. 67 FILED: NEW YORK COUNTY CLERK 07/06/2023 11:59 AM INDEX NO. 155947/2023 NYSCEF DOC. NO. 12 RECEIVED NYSCEF: 07/06/2023 Fourth, eligibility to use the Alternative Method should be determined based on a month-long assessment period, rather than the pay-period’s one week basis. Given the high volatility of utilization rates throughout the week, a one week “lookback” period is unreasonable, administratively burdensome, and provides apps with little ability to manage this volatility of utilization rates, which may result in apps gating more than is necessary, to the detriment of couriers. Fifth, the Standard Method and minimum pay rate are flawed in multiple ways. The requirement to pay couriers (in the aggregate) for all on-call time ignores the reality that couriers can decline offers at will (and make thorough use of this freedom) and threatens couriers’ ability to do so if the apps are constrained to respond by gating or otherwise limiting access to couriers who reject trips. In fact, the Department’s own study showed that while apps send couriers an offer every 4 minutes on average, couriers only accept an offer every 11 minutes – thus, turning down almost 3 offers before they choose to accept one. Proposing a method designed to restrict couriers’ freedom directly conflicts with the New York City Council’s policy choices that support courier flexibility, enabling couriers to set personalized maximum trip distances or restrict the bridges or tunnels they are willing to traverse. Further, the Minimum Pay Rate arbitrarily includes amounts for workers’ compensation that the Department admits will not be used by couriers to purchase such insurance. Sixth, the Department should implement the phase-in schedule as proposed originally in the First Proposed Rule (which starts at 75%) instead of using the aggressively accelerated phase-in schedule that starts at 90% of the full minimum pay rate. The Department has not explained why it made this change beyond generally referencing comments that complained the rulemaking implementation was too slow (and without acknowledging commenters who believed the phase-in proposal was too fast, or was appropriate). The Department should revert to the Commission’s original phase-in schedule of 75%, 85%, and 100%, or, in the alternative, instead adopt a more reasonable schedule with rate increases representing 80%, 90%, 68 FILED: NEW YORK COUNTY CLERK 07/06/2023 11:59 AM INDEX NO. 155947/2023 NYSCEF DOC. NO. 12 RECEIVED NYSCEF: 07/06/2023 and 100% of the minimum pay rate in 2023, 2024, and 2025, respectively. The potential harms of the Rule are too great to gamble on an immediate 90% starting point. Seventh, the Department has failed to meaningfully respond to comments criticizing its use of unreliable survey data, further reflecting the arbitrary nature of its rulemaking process. Eighth, the proposed recordkeeping requirements are invasive, confiscatory and burdensome for apps. Moreover, the Department has failed to articulate how these requirements serve the Department’s calculation of minimum pay rates. Finally, Uber reiterates and incorporates by reference the comments it has already submitted, and draws the Department’s attention to previous issues that it has failed to adequately respond to. BACKGROUND The Second Proposed Rule allows for a “Standard Method” and an “Alternative Method.” Under the Standard Method, apps must meet two separate requirements. First, under the “Individual Pay Requirement,” apps must pay each worker an amount at least equal to that worker’s total trip time during that week multiplied by the minimum pay rate (“MPR”) set forth in the rule.1 Second, each app’s total payments to all delivery workers that use its app (“couriers”) must equal the sum of all of their total trip time and on-call time during a pay period, multiplied by the minimum pay rate (“Aggregate Pay Requirement”). 2 The Second Proposed Rule does not mandate how Aggregate Pay is paid out and thus leaves Apps discretion to determine which couriers receive money for on-call time and in what amount, so long as the total amount required is transferred. 69 FILED: NEW YORK COUNTY CLERK 07/06/2023 11:59 AM INDEX NO. 155947/2023 NYSCEF DOC. NO. 12 RECEIVED NYSCEF: 07/06/2023 Under the Alternative Method, apps must pay each worker an amount at least equal to that workers’ total trip time multiplied by the alternative minimum pay rate—calculated by dividing the MPR by 60%. The 60% figure is what the Department contends is a reflection of the average utilization rate among Uber Eats, Grubhub, and DoorDash from January 2021 through June 2022. 1 Ex. 1, Second Proposed Rule at 4. 2 Id. As defined in the Second Proposed Rule, “trip time” means “the span of time between the moment a food delivery worker accepts an offer from a third-party food delivery service or third-party courier service to perform a trip with a pickup or drop-off location in New York City, or receives an assignment to perform such a trip, through the moment such a trip is completed or canceled,” and “on-call time” means “the time a food delivery worker is connected to a third-party food delivery service or third-party courier service’s electronic system for arranging or monitoring trips in a status where the food delivery worker is available to receive or accept trip offers or assignments with a pickup or drop-off location in New York City and excludes all trip time.” Id. § 7-803(a)(4), (7). As of April 2024, an app may only apply the Alternative Method if it has a utilization rate (or “UR”) of at least 53% for the week-long pay period in which the method is applied. The Department states that it bases this 53% floor by subtracting the “standard deviation of 7%” that the “median app” had in its weekly utilization rate from the 60% average. 3 I. The Department’s Impact Estimates Are Unreliable 70 FILED: NEW YORK COUNTY CLERK 07/06/2023 11:59 AM INDEX NO. 155947/2023 NYSCEF DOC. NO. 12 RECEIVED NYSCEF: 07/06/2023 The Department relies on a number of arbitrary and cherry-picked assumptions in the Second Proposed Rule that are unsupported and understate the adverse impacts it will have on merchants and consumers. This includes, but is not limited to, assumptions about the number of deliveries per hour that couriers will make following implementation of the rule, costs to consumers, impacts on demand, and utilization rates. These unfounded and unexplained assumptions produce unreliable estimates of the impact the Second Proposed Rule will have. As an initial matter, the Department has failed to produce the model underlying the Second Proposed Rule and the Department’s decision-making. Uber first requested this model under the Freedom of Information Law over four months ago. 4 The Department failed to produce the model and other requested materials in the original comment period, depriving commenters of the opportunity to verify and meaningfully comment on the Department’s expectations of the impact of the Rule on the industry. Uber recently reiterated its request for these materials as they relate to the Second Proposed Rule.5 The Department finally produced an incomplete form of its 3 Id. at 12. 4 Ex. 2, FOIL Request (Nov. 29, 2022). 5 Ex. 3, FOIL Request (Mar. 24, 2023). modeling on April 3, 2023—just days before the Department’s public hearing on the Second Proposed Rule. However, the files it produced contain code written in the language “R” and lack any explanation or documentation. Moreover, the documents all seem to relate to the First Proposed Rule, as the files are dated October 2022 and use the previous pay rates. Regardless, this appears to be an incomplete collection of the calculations underlying the Report and does not include numerous other categories of documents requested by Uber. Notwithstanding those requests, the Department unilaterally extended its deadline to respond to Uber’s FOIL request to June 30, 2023, “due to the volume and complexity of records” that are potentially responsive.6 Given the volume of remaining documents the Department has 71 FILED: NEW YORK COUNTY CLERK 07/06/2023 11:59 AM INDEX NO. 155947/2023 NYSCEF DOC. NO. 12 RECEIVED NYSCEF: 07/06/2023 not produced regarding the First Proposed Rule, let alone the production of no documents in response to Uber’s additional FOIL request for documents relating to the Second Proposed Rule, the Department has deprived commenters of the ability to meaningfully comment on its modeling and the impact of the minimum pay rate. The Department’s statement that it “reviewed its impact model and assumptions in light of criticisms raised in comments but found that no changes were warranted” 7 is ipse dixit. This falls flat when no commenters were able to actually critique the model itself, leaving merchants, platforms, and couriers unable to fully understand, comment on, or even verify the significant changes to the industry that the Department’s Rule will cause. Moreover, as New York courts have recognized, failing to provide the modeling “relied on” in promulgating a rule leaves 6 Ex. 4, Email from Records NYC to K. Dunn (Apr. 3, 2023). Delaying production of the requested key materials for six months is certainly not “reasonable under the circumstances of the request” as required by New York law, N.Y. Pub. Officers L. § 89(a)(3), particularly given the coming vote on the proposed rule. And the Department’s reasoning is backwards; the more “voluminous” and “complex” the Department’s modeling and assumptions are, the more the Department needs to disclose them to the public sufficiently in advance of passing a rule with such sweeping risks. 7 Ex. 1, Second Proposed Rule at 15. courts without “a record to evaluate the actions taken by the [Department] and whether such decision was rational.” ZEHN-NY, 2019 WL 7067072, at *4-5. Moreover, the assumptions the Department does make are arbitrary, unfounded, and unsubstantiated. For instance, to model the Second Proposed Rule, the Department assumes that apps will achieve a 60% utilization rate “consistent with the incentives under the alternative method.”8 The Department does not set forth a basis for this assumption and no such basis is apparent. Moreover, if apps do not meet the 60% utilization rate figure that the Department assumes, the impact estimates are in fact overstated in terms of courier earnings, spending on app delivery, and total deliveries. The Department has also been inconsistent in its calculations, assumptions, and 72 FILED: NEW YORK COUNTY CLERK 07/06/2023 11:59 AM INDEX NO. 155947/2023 NYSCEF DOC. NO. 12 RECEIVED NYSCEF: 07/06/2023 projections of deliveries per hour. The Department published a purported study concurrently with the First Proposed Rule titled, “A Minimum Pay Rate for App-Based Restaurant Delivery Workers in NYC” (the “Report”). In the Report, the Department published a table showing the average courier deliveries per hour for the fourth quarter of 2021 based on different modes of transportation, the weighted average (based on the percentage of deliveries) of which is equal to 1.70 deliveries per hour.9 Yet in discussing the model measuring the impact of the minimum pay rate, the Department stated that current courier deliveries per hour is 1.63—with no explanation as to why these figures were different.10 Additionally, the Department initially assumed in its model measuring the impact of the minimum pay rate that courier deliveries per hour will increase to 2.50.11 It also stated that it “projected [a] 51% increase in deliveries per hour,” 12 which (using the 8 Id. at 16. 9 Ex. 5, Report at 14, Table 3. 10 See id. at 34. 11 Id. 12 Id. at 35. 1.63 rate as a base) would be 2.45 deliveries per hour, not 2.50. Nor does the Department explain how it determined its 51% projected increase, simply stating that it expects that “the less efficient apps will increase . . . but not fully match the highest rate of deliveries per hour the Department has observed for an app.”13 Now, in the Second Proposed Rule, the Department’s projected outcomes assume that apps will average 1.94 deliveries per hour.14 But it has not explained how it determined this figure, or why it differs from the 2.50 assumption used in the Report and the First Proposed Rule, or how the increases will be achieved—such as in what part of the increase is caused by reducing waiting time and what amount of the increased is caused by limiting trip length, to the detriment of restaurants and consumers. 73 FILED: NEW YORK COUNTY CLERK 07/06/2023 11:59 AM INDEX NO. 155947/2023 NYSCEF DOC. NO. 12 RECEIVED NYSCEF: 07/06/2023 The deliveries per hour figure, which the Department has changed numerous times without explanation, is critical. The number of deliveries per hour that occur will determine the incremental costs of deliveries that will be passed on to consumers, and thus directly impacts how much the increased fees will decrease merchant orders and revenues. The Department already assumes significant loss of merchant orders and revenues, and in fact the impacts may be even greater, but the public cannot assess that without an explanation of how the Department derived these figures or the model. If the Department’s unsupported predictions are incorrect, the impact on consumer costs and demands may be devastating. In fact, Table 3 from the Second Proposed Rule presents a number of questions and cannot be replicated based on the limited information that has been disclosed. For instance, the Department has not explained how it determined that couriers would earn $23.56 per hour on 13 Id. at 34. 14 Ex. 1, Second Proposed Rule at 16. average when it expects three companies to operate under the Alternative Method and one company to operate under the Standard Method. It also entirely omits the Department’s calculations for the years 2023 and 2024, a time period during which the minimum pay rate will be implemented and consumers, restaurants, and couriers will be required to adapt to it. This type of rulemaking in the dark flies in the face of the public notice and comment system, depriving participants and affected parties from fully participating in the rulemaking process. Additionally, the Department has not even attempted to address previous comments from apps and others regarding the Proposed Rule’s impacts on demand, costs per trip, and total trip length, or its dependence on flawed survey data. For instance, Uber previously explained the flaws in the Department’s assumption that deliveries would increase from 1.63 per hour to 2.50 per hour, despite acknowledging that demand may go down by 15.6% due to an increase in costs. 15 74 FILED: NEW YORK COUNTY CLERK 07/06/2023 11:59 AM INDEX NO. 155947/2023 NYSCEF DOC. NO. 12 RECEIVED NYSCEF: 07/06/2023 Following this critique, the Department lowered its assumption to apps averaging 1.94 deliveries per hour, as discussed above, but did not explain why it did so, how it got that figure, or if its reduction was in response to Uber’s comment or something else.16 Even if the Department were correct in making this assumption, it ignores the reality that deliveries would increase at a much greater rate if not for the policies imposed via the rulemaking. Simply taking one previously unjustified assumption (increases in deliveries to 2.50 per hour) and replacing it with another unjustified assumption (increases in deliveries to only 1.94 per hour) does not reflect reasoned rulemaking, and in any event reflects the Department’s failure to focus on what growth would have been in the absence of the rulemaking. Such arbitrary changes to an assumption in response to a critique does not reflect reasoned rulemaking. 15 Ex. 6, Uber’s December 15, 2022 Comment at 2. 16 This difference is not explained by the Department’s accounting of multi-apping either, as it determined that couriers will average 2.29 deliveries per hour after accounting for multi-apping. Ex. 1, Second Proposed Rule at 16. Nor did the Department even respond to Uber’s comment that costs per trip will increase significantly, likely leading to greater reductions in orders placed with restaurants, if apps are unable to achieve a sustained average of 2.5, or 1.94, deliveries per hour. 17 For instance, as Uber estimated at the time, if apps were only able to increase deliveries per hour to 2.05, demand would have been expected to drop by 22.0%.18 Yet faced with this information, the Department did not respond other than to say that it does not believe it needs to revise its assumptions. 19 In fact, the Second Proposed Rule references demand only twice. When faced with this evidence that the drop in demand may be greater than estimated and have drastic consequences, the Department instead chose to hide their findings. Couriers, merchants, apps, consumers, and the courts are entitled under the law to understand the Department’s explanation and reasoning, especially when the potential consequences are so significant. The Second Proposed Rule contains the same risks. Even at the Department’s 75 FILED: NEW YORK COUNTY CLERK 07/06/2023 11:59 AM INDEX NO. 155947/2023 NYSCEF DOC. NO. 12 RECEIVED NYSCEF: 07/06/2023 arbitrary and unexplained assumptions of deliveries per hour at 1.94, and elasticity, cost per delivery would immediately increase by $4.91 in 2023, with apps facing a 14.8% reduction in demand, which harms restaurants.20 These impacts would increase to $5.94 cost increases and a 17.9% reduction in demand by 2025, without even accounting for inflation adjustments. And the Department has not adequately considered or explained the ramifications if either of these critical assumptions is wrong, such as through a sensitivity analysis. For instance, if the Department’s arbitrary assumptions are correct except productivity stays at current levels, the immediate cost increase in 2023 would be $6.67 per delivery, resulting in an over 20% decrease in orders. 17 Ex. 6, Uber’s December 15, 2022 Comment at 2-3. 18 Id. at 3. 19 See Ex. 1, Second Proposed Rule at 15. 20 At a utilization rate of 60%, the Standard and Alternative Methods have identical impacts. Impact of Pay Per Trip Requirement Under the Standard and Alternative Method 1 (utilization rate of 60%, elasticity of 1) 2023 ($17.76 p/h) 2024 ($18.96 p/h) 2025 ($19.96 p/h) Productivity Added Added Added (Deliveries Cost Per Cost Per Cost Per % Δ in % Δ in Per Hour) Delivery Delivery Delivery Orders Orders % Δ in Orders 1.94* $4.91 -14.8% $5.42 -16.4% $5.94 -17.9% 1.87 $5.26 -15.9% $5.79 -17.5% $6.32 -19.1% 1.81 $5.58 -16.8% $6.13 -18.5% $6.68 -20.2% 1.75 $5.92 -17.9% $6.49 -19.6% $7.06 -21.3% 1.69 $6.28 -19.0% $6.87 -20.8% $7.46 -22.5% 1.63** $6.67 -20.2% $7.28 -22.0% $7.90 -23.9% 1 * 1.94 deliveries per hour is the Department’s productivity assumption for apps from the Second Proposed Rule. ** 1.63 deliveries per hour is the Department’s calculation of current productivity. 76 FILED: NEW YORK COUNTY CLERK 07/06/2023 11:59 AM INDEX NO. 155947/2023 NYSCEF DOC. NO. 12 RECEIVED NYSCEF: 07/06/2023 The impacts on demand would be even greater if the Department’s unexplained elasticity assumptions are incorrect as well. For example, if all of the Department’s assumptions are correct except that elasticity is in fact 1.5, demand would drop by 26.9% based on the 2025 rates, 9 percentage points greater than under the Department’s assumptions. Impact of Pay Per Trip Requirement Under the Standard and Alternative Method (minimum pay of $19.96 p/h, utilization rate of 60%) Elasticity = 1 Elasticity = 1.5 Elasticity = 2 Productivity Added Cost (Deliveries Per Hour) per Delivery % Δ in Orders % Δ in Orders % Δ in Orders 1.94* $5.94 -17.9% -26.9% -35.9% 1.87 $6.32 -19.1% -28.7% -38.2% 1.81 $6.68 -20.2% -30.3% -40.4% 1.75 $7.06 -21.3% -32.0% -42.6% 1.69 $7.46 -22.5% -33.8% -45.1% 1.63** $7.90 -23.9% -35.8% -47.7% Nor did the Department properly consider the impact of the MPR should apps fail to achieve the arbitrary assumption that they will reach 60% utilization. For instance, even if an app achieves a utilization rate of 56.5%, such that the alternative method is available to that app, but productivity does not change (for example, by having longer trips), apps would still see a $7.18 increase in delivery costs and would expect a 21.7% reduction in demand, which would harm restaurants. Impact of Pay Per Trip Requirement Under the Alternative Method (minimum pay of $19.96 p/h, elasticity of 1) UR = 53.0% UR = 56.5% UR = 60.0% Productivity Added Added Added (Deliveries Cost Per Cost Per Cost Per % Δ in % Δ in % Δ in Per Hour) Delivery Delivery Delivery Orders Orders Orders 1.94* $4.74 -14.3% $5.34 -16.1% $5.94 -17.9% 1.87 $5.08 -15.3% $5.70 -17.2% $6.32 -19.1% 1.81 $5.39 -16.3% $6.03 -18.2% $6.68 -20.2% 77 FILED: NEW YORK COUNTY CLERK 07/06/2023 11:59 AM INDEX NO. 155947/2023 NYSCEF DOC. NO. 12 RECEIVED NYSCEF: 07/06/2023 1.75 $5.73 -17.3% $6.39 -19.3% $7.06 -21.3% 1.69 $6.08 -18.4% $6.77 -20.5% $7.46 -22.5% 1.63** $6.47 -19.5% $7.18 -21.7% $7.90 -23.9% The Department’s failure to consider such an array of outcomes or adjust its models based on these factors reflects the arbitrary nature of its rulemaking process, and the risk it is imposing on New York restaurants. Just as importantly, the Department has not disclosed the impact on other key outputs under its modeling, including total trip length and distance which directly relate to courier preferences and flexibility, as well as merchant revenues. In addition, the Department recognized “that app-based delivery is less costly to provide where there are high order volumes and short trip distances,” but the Department failed to analyze the effects of the minimum pay rate’s impact on total trip length. 22 As the Department seemingly recognizes, the Second Proposed Rule provides a strong incentive to shorten total length in order to increase the amount of deliveries per hour and spread the increased costs per hour across multiple customers. To achieve this goal, apps will be forced to reduce the maximum delivery radius, thereby limiting consumer choice and shrinking the potential customer pool for restaurants. But the Department may have not even considered these harmful effects, but it has not disclosed its analysis or explained why they may be acceptable. II. The Pay Rate Under the Alternative Method Is Arbitrary Uber Eats welcomes the addition in the Second Proposed Rule of the Alternative Method, in that it provides for payment only for time spent on trip. However, the decision to set the alternative method rate at the MPR/.60 is arbitrary. The Department should reevaluate the Alternative Method Rate and calculate it by using a utilization figure of around 87%. The Department provides its 60% utilization rate figure “reflects” the “average 78 FILED: NEW YORK COUNTY CLERK 07/06/2023 11:59 AM INDEX NO. 155947/2023 NYSCEF DOC. NO. 12 RECEIVED NYSCEF: 07/06/2023 weekly utilization rate from January 2021 through June 30, 2022 for Uber Eats, Grubhub, and DoorDash, combined. This means that across this 18-month period, in the average week, workers at these apps were engaged in trip time 60% of the time and on-call time 40% of the time.” As a starting point, the Department's selection of 60% and its explanation are arbitrary and insufficient. The Department does not adequately explain why the time period it selected is appropriate, as opposed to a more recent period of data reflecting current trends, what the outcome would be during other options, or in what sense the “average week” was average. The Department also in making its calculations excluded data from Relay. Relay is the app with the highest utilization, and thus its exclusion from the data set appears results 22 Ex. 1, Second Proposed Rule at 16. oriented. And, Relay is the app whose business model may have more similarities to how the app’s model will change if the Rule is enacted, making the exclusion of Relay data arbitrary. Currently, Relay is the only app that directly compensates couriers for on-call time, as will be the case following implementation of the minimum pay rate, and engages in the extensive type of gating practices that could result following implementation of the minimum pay rate. Yet, the Department excluded Relay from its measurement of average utilization rates. In other words, the Department excluded from calculations, for purposes of setting rates in the future, the app behaving most like apps may have to behave like in the future. If anything, the Department should have only considered Relay in assessing apps’ future utilization given the expected changes in behavior. Thus, the Department has failed to adequately consider the impact of its rule and engaged in arbitrary rulemaking. The Department should have included data from Relay. The Department’s use of a utilization rate of 60% to calculate the hourly rate under the Alternative Method is also arbitrary and flawed because it includes on-call time that should be excluded. Couriers, as independent contractors, are empowered to accept or reject trip offers based on 79 FILED: NEW YORK COUNTY CLERK 07/06/2023 11:59 AM INDEX NO. 155947/2023 NYSCEF DOC. NO. 12 RECEIVED NYSCEF: 07/06/2023 personal preferences (or may simply have an app open for hours on end with no intention of completing any trips). The Department’s proposal fails to recognize courier prerogative to accept or reject trips, including based on whatever factors may motivate a courier at a particular moment in time. Because couriers’ freedom of choice reduces utilization rate for factors beyond the control of the platforms, making a minimum pay rate based on all on-call time is flawed. The Alternative Method’s use of a multiplier on the standard MPR is similar in some ways at a very basic level to previous proposals submitted by Uber and other apps in response to the First Proposed Rule. Commenters proposed indexing to the time between completion of a trip and receipt of the next offer while not including the time between offers in “on-call time” if the courier rejects the latest offer, as well as excluding the time a courier is logged onto an app before their first delivery and after their last delivery, provided a more accurate representation of time for which couriers should be compensated.23 In particular, Uber proposed that the Department use a 1.15 multiplier to the minimum pay rate for each trip (achieving the same effect as using an 87% utilization rate). Uber calculated this multiplier based on the average length of time that a courier waited before accepting an offer divided by the average trip duration. 24 This proposal accurately accounted for the fact that many couriers may be engaged in some other nondelivery activity, or simply exercising the freedom and choice couriers have, and which the City Council sought to expand with a package of laws that gave couriers more control and information about each delivery they take. The Department rejected Uber’s and other recommendations, instead calculating the Alternative payment rate based on a utilization rate of 60%, which includes time when couriers are not accepting multiple offers. The Department appears to have based its decision on the view that couriers decline offers because apps are making low-paying offers. 25 In reality there are many reasons couriers reject trips (with no penalty to them)—including couriers being busy delivering for other apps, couriers not ready and willing to work in that moment, courier preferences about 80 FILED: NEW YORK COUNTY CLERK 07/06/2023 11:59 AM INDEX NO. 155947/2023 NYSCEF DOC. NO. 12 RECEIVED NYSCEF: 07/06/2023 delivery distance and route,26 market dynamics, and perhaps for no reason at all other than the courier’s mood at the time. The Department did not ask couriers their reasons for rejecting trips in its survey, and thus lacks a complete understanding why couriers reject trips, let alone assume it is due to below-market offers. 23 Ex. 7, Uber’s December 8, 2022 Comment.