Big shakeups are coming to the city of Los Angeles’s current delivery fee cap ordinance for restaurants, which prohibits app companies from charging more than 15 percent of the cost of any food order for delivery fees. Under the current structure, the delivery caps are set to expire on August 31, meaning tech giants like Uber Eats and Postmates (now the same company) would be allowed to return to whatever model they so choose — including the 30-40 percent fees being charged earlier this year.
The city of Los Angeles’s chief legislative analyst, Sharon M. Tso, said in a report filed several days ago that without further legislative action from city council and the mayor, the fee cap will naturally expire at the end of this month. Originally, the ordinance — approved unanimously on May 20 — was meant to “sunset 90 days after the prohibition of on-premises dining has been lifted,” but there is some confusion as to what constitutes on-premises dining, and when such a prohibition went into effect in the first place.
Per Tso’s report:
On May 29, 2020, Governor Gavin Newsom, and subsequently the Board of Supervisors of Los Angeles County, lifted the prohibition of on-premises dining, triggering the expiration of the ordinance to occur on August 31, 2020. However, on July 1, 2020, those restrictions were reimplemented to combat the rapid spread of COVID-19.
Indeed Newsom did allow for restaurants to reopen for sit-down service on May 29, before closing indoor dining rooms again on July 1. But, because outdoor dining has remained in place, the clock has continued to tick, Tso says. The original ordinance could be interpreted as ending on August 31, then, without further intervention from the city council and ultimately the mayor, even though it only really went into effect for businesses in early June after being legally defined by the city attorney and then formally signed by the mayor.
To offset the roll-back, Tso recommends that the council asks the city attorney to “prepare and present an amendment to the Limit on Third-Party Food Delivery Fee Service Ordinance to extend the expiration date from August 31, 2020 to a time when the city of Los Angeles is no longer under a locally declared state of emergency as related to the COVID-19 pandemic.”
Such a change would make the 15 percent fee cap essentially ongoing, with no firm timeline for its removal, since there is no deadline for the city’s state of emergency to expire just yet.
What’s more, Tso’s report recommends that the council come to an agreement on several amendments to the original ordinance “that would provide a means to enforce the ordinance including a monetary penalty structure and a reporting mechanism for restaurants that have been overcharged.” Multiple restaurants have reported being continually overcharged by app companies, despite the ordinance in place.
The city council has not yet committed to Tso’s recommendations, but with the pandemic ongoing and no signs of a return to indoor sit-down dining any time soon, it’s likely that councilmembers will act before the expiration date to adjust the ordinance in one way or another.