MAIN NEWSLETTER SIGN UP

Instacart and DoorDash Hike Fees in Seattle Following Wage Law

Instacart and DoorDash are raising prices in Seattle following the city’s new minimum pay law.

Seattle in 2022 passed legislation that increased wages for drivers for the delivery apps. That law went into effect Saturday (Jan. 13), and is happening as the federal government is looking to raise wages for gig workers around the country.

According to a Seattle Times report, the new city law requires companies like DoorDash and Instacart to pay at least 44 cents per minute plus 74 cents per mile during orders (or $5 per order for orders that would otherwise pay less). 

The city’s regular minimum wage of $19.97 per hour for employees at large companies hasn’t been directly applied to delivery-app drivers, whom companies have treated as independent contractors.

Steven Marchese, director of the Seattle Office of Labor Standards, told the newspaper the law was “an important step forward” in the city’s effort to create a gig economy that empowers workers, consumers and businesses.

However, both Instacart and DoorDash have criticized the law, and recently announced price increases and other changes.

Instacart said in a message to customers last week that they would “see new fees as a result of the significant increase in operating costs under this regulation,” with the company projecting that the wage hike amounts to drivers getting $26 per hour.

In addition, the new requirements mean Instacart will “only be able to facilitate orders from Seattle retail locations to customers who live within Seattle,” meaning “that customers outside of Seattle will not be able to order from stores within Seattle, and vice versa.”

DoorDash also says it’s introducing new fees and argues that the new law, “while well-intentioned,” will harm its drivers, customers and merchants.

“Merchants may experience significant declines in order volume as well as negative impacts to service,” the aggregator said in its announcement.

The new law is going into effect as the U.S. Department of Labor is preparing rule changes that could give gig workers more benefits and make it more difficult for companies to classify these employees as independent contractors.

While companies maintain the rules won’t have much effect on them, PYMNTS wrote last week that they could have a larger impact than anticipated.

“Structural changes may force a reckoning, where the platforms take on less supply, so to speak, as they contend with rising costs,” PYMNTS wrote.

“Consequently, they may hike prices: Uber said last fall that a proposed European gig worker law (which is still being hammered out) could trigger price increases of as much as 40%.”