Outsourcing jobs from abroad has helped countless businesses in the United States and Europe. However, here’s a certain instance when outsourcing becomes illegal.
The accused: Grubhub.
Documents obtained by ridesharing media stated that Grubhub outsourced or “sub-contracted” several deliveries to a third-party company to circumvent the minimum wage laws of New York, they reported to Ridesharing Forum.
The company where they got workers from: Relay.
So, what’s the minimum wage regulations all about that Grubhub is complaining about? Since December 2023, the minimum wage ruling in the Big Apple has required that delivery apps pay workers a minimum hourly rate that takes into account the costs associated with being a private contractor.
Grubhub – together with Uber, DoorDash, and Relay sued New York City so they will stop implementing the law, but Relay offered a loophole to appease the accused.
What is Relay? Well, Relay is a commission-free courier provider for restaurants, focusing on local, fast-food delivery, and an overnight, secure logistics network used by companies to replenish stock or deliver documents between sites.
Relay created a loophole that made it possible for Grubhub to outsource workers from them if it feels it is being deprived of rights.
This is why the “partnership” started last year, January 2024, according to former employees that blew the whistle saying that Grubhub did outsource jobs, something not allowed in the law.
“We’ve partnered with Relay Delivery, a third-party delivery as a service company, in New York City to outsource some of our fulfillment responsibilities to them,” the internal email to Grubhub employees read. “This partnership arises primarily to stem elevated driver pay costs in the Big Apple, which have more than doubled since the new driver pay law was introduced.”
Thanks to the loophole, private contractors were paid just $13.35 per hour in October 2024, something that isn’t the range that the minimum wage law indicates. Meanwhile, delivery workers received as little as $21.44 each hour.
Since Relay doesn’t require tips, it allowed Grubhub to save money. Can’t they?
“Grubhub wanted to use Relay because they wouldn’t have to pay for the workers’ time. Since Relay was not subject to the pay standard, they could take advantage of free labor that way,” commented James Parrott, who helped write the minimum pay standard law. “It’s a pretty obvious move to sidetrack the pay requirement.”
Here’s what’s worse. Restaurants and merchants delivering for Grubhub did not know that Relay workers are fulfilling the orders. In that case, they could’ve just gone directly to Relay workers, instead of Grubhub delivery staff.
“Testers report[ed] that the tracking, handoff, and timing were all consistent with what they expected from a Grubhub delivery,” the internal email went on, explaining the glaring distinction.
Grubhub was allegedly able to save 39 percent in cost for each order sent to Relay, which totals around $5 million yearly, according to the document.
This is over Grubhub and other delivery apps also deactivating workers out of the oddest of reasons. Want to fight for your insights? Open your account today like opening a bank account to take part in the discussions. The prize is getting your thoughts heard here!