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Ultra-fast delivery services are ditching the gig-worker model

DoorDash delivery worker holding DoorDash-branded bag while on bike outside.
REUTERS/Carlo Allegri
15 minutes or less is the new way of delivering.
  • Michelle Cheng
By Michelle Cheng

Reporter based in New York

Published

DoorDash has now entered the super-fast grocery delivery space. Today, the food delivery company said it is offering customers in New York City delivery in 10 to 15 minutes. The deliveries will be fulfilled from a new DashMart, which is essentially a convenience store offering a range of some 2,000 grocery items and household goods.

The San Francisco-based company, which is the market leader in US food delivery, said the service will expand to other locations in New York and other cities in the coming months. Customers who have DashPass, the company’s subscription service, won’t pay delivery fees and will pay reduced service fees on ultra-fast service.

The deliveries will be handled by DoorDash employees, not contractors, suggesting that delivering orders rapidly cannot be fulfilled by DoorDash’s gig-worker model. Other ultra-fast grocery delivery companies like JOKR and Gorillas that have emerged in the past year or so have hired delivery workers as employees as well.

DoorDash says it is hiring about 60 couriers as employees per location. Employees will be paid an hourly wage of $15 an hour plus tips, and will receive employee benefits including medical, dental, vision insurance, and even commuter benefits. The employees will complete a variety of tasks beyond delivery including shelf-stocking, customer support, and administrative work. Workers will also set schedules—working about 20 hours per week—wear uniforms, report to a manager, and use a different DoorDash app.

Signaling a possible shift away from the gig-contractor model

DoorDash and other gig companies have long said their workers want to remain independent contractors and that the binary employment model of workers being employees or independent contractors in the US is outdated. DoorDash has millions of delivery workers on its platform and says the majority have other full- or part-time jobs. But DoorDash’s retreat from gig work may signal a change in philosophy and a realization that a permanent workforce, complete with W-2 tax forms, is necessary for some tasks.

“It’s probably a little too early to predict…the optimal version of this business model,” says Tom White, a senior equity analyst at DA Davidson, a financial services firm. “When you’re first launching it, and if you really are committed to 15 minute deliveries, it would seem probably safer to rely on W-2 employees so you don’t run the risk that you can’t get a liquid enough pool of couriers.”

“It’s unclear if this is the one that sustains,” he adds. “It’s possible that if this product really takes off and consumers really like it and that you get a really liquid pool of consumers ordering, that will attract a pool of couriers or drivers. And maybe they can ultimately transition to a kind of a contractor model kind of like the rest of their business.”

The precariousness of gig work

The shift in hiring comes even after DoorDash, Uber, and Lyft banded together last year to spend over $200 million in support of Proposition 22, a state measure that essentially exempted the gig companies from California’s labor law, which would have required them to reclassify workers as employees.

Companies that rely on gig employment have faced backlash from workers on treatment and pay for years. One new concern is ultra-fast delivery can make the job riskier by encouraging workers to drive recklessly. “[F]or Gorillas personally it would be more difficult to guarantee our ultra fast delivery service if we didn’t provide riders the option to be W2 workers,” according to Adam Wacenske, US head of operations at Gorillas, in an email. “We make decisions that ultimately lead to the desired outcome of making sure every delivery experience is perfect. Having riders as W2 workers allows us to ensure their safety.”

With the gig platforms rapidly evolving, it also points to the overall precariousness of working for them. In 2015, Instacart re-classified in-store shoppers from independent contractors to employees.

“Grocery shopping is not easy,” Instacart CEO Apoorva Mehta said to Bloomberg in 2015. “It takes nuance and skill to pick the best items. What we found is that our shoppers require training and supervision, which is how you improve the quality of the picking. You can’t do that when they are independent contractors.”

Yet for many of those new Instacart employees the change in employment status didn’t last. In January, Instacart eliminated more than 1,000 positions, attributing it to a shifting business model where retailers had their own workers prepare customers’ orders.

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