(The Center Square) — New tipping laws for delivery drivers went into effect in New York City on Monday after a federal judge rejected a last-ditch effort by GrubHub, Uber, and other companies to block the rules.
In a ruling Friday, U.S. District Court judge George Daniels sided with New York City in a fight over a new law that requires third-party delivery apps like DoorDash and Uber Eats to allow customers to tip at checkout, with a default 10% option. The judge rejected a request from the companies to block the law from going into effect, saying the city is likely to succeed in its legal arguments.
The companies immediately appealed the decision, warning that the judge’s ruling will impact delivery services and hurt the Big Apple’s economy.
In a statement, DoorDash said allowing the law to take effect “means we will likely see an immediate drop off in orders for New York’s small businesses, a worse experience for customers, and fewer overall deliveries for New York City dashers.”
“Forcing platforms to solicit a tip before checkout at a time when New Yorkers are sick of tipping culture and facing a growing affordability crisis is bad policy – plain and simple,” the company said. “We’re disappointed in this ruling, but are confident in our position and will continue working to prevent further losses for local businesses and higher costs for consumers.”
The ruling is a win for New York City Mayor Zohran Mamdani, who has accused app-based delivery companies of mistreating workers and vowed to regulate the industry. Shortly after taking office earlier this month, Mamdani’s administration filed a lawsuit against delivery company Motoclick and its chief executive officer, accusing the company of withholding pay from workers.
Samuel Levine, commissioner of the city’s Department of Consumer and Worker Protection, was among those who praised Friday’s ruling, saying it “affirms that multi-billion-dollar companies need to comply with laws that protect workers and consumers.”
Gov. Kathy Hochul has signalled she might support “No Tax on Tips” legislation being considered by state lawmakers as part of her administration’s “affordability” agenda in the coming year.
New York Republicans have pitched plans for a state policy mirroring a provision of President Donald Trump’s One Big Beautiful Bill Act, which went into effect this year, allowing tipped workers to deduct $25,000 in tips annually from their taxable income. After that, tips will be federally taxed.
The law will phase out at the end of 2028 — at the end of Trump’s presidency — unless Congress votes to extend the tax breaks.
Republicans have long said New York’s highest-in-the-nation tax burden and a business sector that is struggling under excessive regulations, as well as rising labor costs, are driving people out of the state. They say the state tax on tips is one example of an unnecessary regulation that hurts the state’s economy.
New York lost $24.5 billion in state-adjusted gross income in 2021 as residents fled to New Jersey, Florida and other low-tax states, according to the latest Internal Revenue Service figures.
Nowhere was the state’s outmigration more prevalent than in New York City, the nation’s largest city with a population of 8.2 million. The Big Apple had a net loss of nearly 78,000 residents between 2022 and 2023, according to IRS data.
