Is DoorDash Actually Phasing Out Gig Workers? Company Experiments With Full-Time Employees

DoorDash, known for its gig-worker model, has partnered with two companies to employ hourly workers with benefits. This shift raises questions about whether the company is gradually transitioning away from its traditional contractor-based business model.

DoorDash's Local Commerce Service Partner Program is collaborating with at least two local delivery providers, one in Austin, Texas, and another in Fresno, California. These providers are responsible for hiring employees to fulfil DoorDash orders.

DoorDash Partners With Local Providers

Both companies' websites indicate they are hiring W-2 employees, a significant departure from the gig-worker model that DoorDash and other delivery services have primarily relied on. This development follows months after the US Labour Department introduced a new rule to assist gig workers in qualifying for employee status.

Despite their small scale, these partnerships signify a departure from the business model that has propelled DoorDash to become a global leader in delivery services. Since its inception in 2013, DoorDash has primarily relied on independent contractors, who are typically paid per delivery and enjoy greater flexibility in their work hours compared to traditional employees.

Uber, Lyft, Instacart, and other delivery companies have similarly leveraged gig workers to fuel their growth, contributing to the surge of millions of Americans entering the gig economy. A DoorDash spokesperson explained that employing hourly workers with scheduled shifts of up to several hours ensures a consistent workforce to fulfil deliveries.

"We remain committed to preserving and protecting the flexibility of independent work that the vast majority of Dashers prefer," a DoorDash spokesperson said, referring to the company's independent contractors.

"However, we also know there is a small subset of workers who prefer set schedules and the predictability of W2 work, which is why we're piloting LCSP in select markets to focus on maintaining healthy supply levels and supplement the handling of new and different types of orders," the spokesperson added.

Concerns And Challenges For Gig Workers

According to DoorDash's website, LCSPs (Local Commerce Service Partners) are independent businesses that operate their own delivery services, employing their own fleet of delivery associates to fulfil orders placed through the DoorDash platform.

The website of Fresno Logistics, one of the partner companies, says it offers "high-quality logistics services to restaurants, grocery and convenience stores, and a variety of other businesses (e.g., retail) in the Fresno, CA area through the DoorDash Platform."

Fresno Logistics' website highlights attractive benefits for potential employees, including a $16 hourly wage, tips, mileage reimbursement, healthcare, and paid time off (PTO). This offer contrasts favourably with the earnings of many gig delivery workers, as a recent UC Berkeley study revealed that many earn less than minimum wage after accounting for expenses like gas.

Austin-based LCSP One, as stated on its website, offers W-2 workers an hourly wage of $13 plus tips and a mileage reimbursement of 10 cents per mile. Full-time delivery employees must work four 10-hour shifts scheduled from Monday to Friday each week, while part-time workers must complete a minimum of 20 deliveries.

LCSP One's home page describes the company as offering employees "a gig-work mentality with a career mindset." Fresno Logistics and LCSP One did not respond to Business Insider's requests for comment.

Gig workers often lack the benefits and legal protections provided to employees. Some gig workers have reported a decline in their earnings over the past few years, particularly when compared to early 2020, when demand for grocery, takeout food, and other goods delivery surged.

Many gig workers have reported having their delivery app accounts deactivated without a clear explanation. Additionally, some gig workers have highlighted performance metrics, such as the percentage of orders accepted, as evidence that the work is becoming increasingly similar to a traditional job.

Employing delivery workers could address some issues by providing more predictable pay and reimbursing them for mileage. Additionally, the pay for gig workers has been rising in certain cities. New York City and Seattle recently implemented laws to increase gig worker wages.

A 2022 report detailed a proposed Department of Labor rule under review by the White House's Office of Information and Regulatory Affairs (OIRA). This rule aims to clarify whether gig workers for companies like Uber, Lyft, and DoorDash and retailers like Amazon.com Inc. are misclassified as independent contractors.