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HomeMy WebLinkAbout4.13 - 3386 Third-Party Food Delivery Urgency Ordinance Page 1 of 2 STAFF REPORT CITY COUNCIL DATE: September 15, 2020 TO: Honorable Mayor and City Councilmembers FROM: Linda Smith, City Manager SUBJECT: Urgency Ordinance Establishing a Temporary Cap on Commission Charges by Third-Party Food Delivery Services on Dublin Restaurants During the COVID-19 Pandemic Prepared by: Hazel L. Wetherford, Economic Development Director & Jordyn Bishop, Acting Assistant City Attorney EXECUTIVE SUMMARY: The City Council will consider adopting an urgency ordinance establishing a temporary 15% cap on commission fees charged by third-party food delivery companies on local restaurants during the COVID-19 pandemic. STAFF RECOMMENDATION: Adopt the Urgency Ordinance Establishing a Temporary Cap on Commission Charges by Third-Party Food Delivery Services on Dublin Restaurants During the COVID-19 Pandemic. FINANCIAL IMPACT: None. DESCRIPTION: At the August 18, 2020 City Council meeting, the City Council directed Staff to prepare a report on COVID-19-related limits on fees charged by third-party food delivery companies enacted by various cities in the East Bay. At the September 1, 2020 meeting, the City Council received the report, which discussed the challenges that restaurants are facing during the pandemic, particularly related to shifting from in-house dining to delivery and the high fees associated with that service. The City Council then directed Staff to prepare and bring back an urgency ordinance capping third-party deliver fees. The City of Dublin has heard from local businesses who attest to increasing delivery fees from third-party food delivery companies looking to leverage their position during the COVID-19 emergency. Capping delivery food service fees at 15% per order will Page 2 of 2 achieve the public purpose of ensuring the continued operation of local restaurants and third-party platforms during the period of emergency; the 15% cap is based on the findings and experience of other California cities and cities nationwide that have already adopted 15% fee ceilings or similar caps as reasonable emergency regulations. The urgency ordinance also prohibits a third-party food delivery service from reducing the compensation, including any tip or gratuity, paid to any of their workers, or the restaurant, as a result of the cap imposed. If a restaurant or food delivery service worker alleges that a delivery service provider has violated the urgency ordinance, the individual or restaurant would have the ability to file a civil action in court to seek damages or injunctive relief to stop the violation from continuing to occur. The urgency ordinance does require that a notice of alleged violation be first given to the food delivery service provider, who will have seven calendar days to cure any alleged violations (such as issuing a refund or adjusting their mobile applications for ordering), before a civil action may be filed. Following adoption by at least a four-fifths vote of the City Council, the urgency ordinance will go into effect and be enforced immediately, and will remain in effect until its expiration date of one year from the effective date, or upon termination of the local state of emergency, whichever occurs first; or as otherwise terminated, modified or extended by the City Council. STRATEGIC PLAN INITIATIVE: None. NOTICING REQUIREMENTS/PUBLIC OUTREACH: None. ATTACHMENTS: 1. Urgency Ordinance Establishing a Temporary Cap on Commission Charges by Third- Party Food Delivery Services on Dublin Restaurants During the COVID-19 Pandemic URGENCY ORDINANCE NO. XX - 20 AN URGENCY ORDINANCE OF THE CITY OF DUBLIN ESTABLISHING A TEMPORARY CAP ON COMMISSION CHARGES BY THIRD-PARTY FOOD DELIVERY SERVICES ON DUBLIN RESTAURANTS DURING THE COVID-19 PANDEMIC WHEREAS, on March 1, 2020, the Alameda County Health Officer declared a public health emergency; and WHEREAS, on March 4, 2020, California Governor Gavin Newsom issued a State of Emergency Proclamation for the State of California; and WHEREAS, on March 16, 2020, the Alameda County Health Officer issued an order directing all individuals living in the County to shelter at their place of residence, subject to certain exceptions; and WHEREAS, on March 16, 2020, the Dublin City Manager, acting as the Director of Emergency Services, proclaimed the existence of a local emergency within the City of Dublin pursuant to Dublin Municipal Code Chapter 2.44.060(A); and WHEREAS, on March 18, 2020, the City Council at a special City Council meeting, ratified and extended the proclamation of existence of a local emergency; and WHEREAS, on March 19, 2020, the Governor of California issued a stay-at-home order to protection the health and well-being of all Californians and slow the spread of COVID-19; and WHEREAS, the Alameda County Health Officer issued subsequent revised Shelter In Place Orders, including on March 31, 2020, April 29, 2020, May 18, 2020, and June 5, 2020, which included extending restrictions on activities and requiring individuals to shelter at home, and allowing for certain specified activities; and WHEREAS, on April 10, 2020, the Director of Emergency Services fully activated the Emergency Operations Center virtually at Level 3 (Response Level) to coordinate the City’s response to the COVID-19 pandemic; and WHEREAS, on May 5, 2020, the City Council reaffirmed and revised the proclamation of existence of a local emergency; and WHEREAS, on June 18, 2020 the Alameda County Health Officer revised the June 5, 2020 Order, effective June 19, 2020, to allow outdoor restaurant dining as well as other specified activities, but not allowing for any indoor dining; and WHEREAS, on July 13, 2020, the State Public Health Order issued an Order closing all indoor restaurant dining statewide, among other indoor operations; and WHEREAS, as a result of the public health emergency and the orders issued by health authorities, restaurants in the City of Dublin have been limited to takeout and delivery offerings (plus limited outdoor dining if available but often with reduced capacity) which has led to a sudden and severe income loss and financial strain for Dublin’s restaurants, particularly those who operated on thin margins before the pandemic and those who did not have robust takeout and delivery infrastructure or outdoor seating capacity; and WHEREAS, many consumers use third-party applications and websites to place orders with restaurants for delivery and takeout and these applications and websites typically charge the restaurants between 10 and 30 percent of the purchase price of the order as a commission; and WHEREAS, restaurants have limited bargaining power to negotiate lower fees with third- party platforms, given the high market saturation of third-party platforms and the dire financial straits restaurants are facing in this COVID-19 emergency; and WHEREAS, state anti-gouging laws and State of California Executive Order N-44-20 provide protections against profiteering and unscrupulous business practices but do not provide any protections in the market for food delivery services; and WHEREAS, if retail food providers raise their costs or close as a result o f high fees from third-party delivery services, their workers will lose employment, thereby affecting their ability to provide for their families, and the community will lose access to essential food services for its residents; and WHEREAS, continuity of operations among the City’s restaurants is critical for the delivery of essential food services to the residents of Dublin and to sustain these sources of employment and neighborhood vitality within the City; and WHEREAS, several Bay Area jurisdictions, including San Francisco, Oakland, Berkeley, Fremont, San Leandro, and Livermore have experienced significant increases in delivery fees from third-party delivery services that also operate in Dublin and have recently enacted similar measures to cap the fees they may charge at 15 percent; and WHEREAS, the City of Dublin has heard from local businesses who attest to increasing delivery fees from third-party delivery services looking to leverage their position during the COVID-19 emergency; and WHEREAS, capping delivery service fees at 15 percent per order, will achieve the public purpose of ensuring the continued operation of local restaurants and third -party platforms during the period of emergency; the 15 percent cap is based on the findings and experience of other California cities and cities nationwide that have already adopted 15% fee ceilings or similar caps as reasonable emergency regulations; and WHEREAS, the California Constitution, Article XI, Section 7, provides cities with the authority to enact ordinances to protect the health, safety, and ge neral welfare of their citizens; and WHEREAS, California Government Code Section 36937 authorizes the City Council to introduce and adopt an ordinance it declares to be necessary as an emergency measure to preserve the public peace, health and safety at one and the same meeting if passed by at least a four-fifths affirmative vote; and WHEREAS, in light of the economic impacts of the public health emergency on local restaurants and the necessity to preserve access to essential services and protect public he alth and safety in Dublin, the City Council finds and determines there is an immediate need to preserve public health, safety and welfare by enacting an ordinance to cap the per-order fee third-party applications and websites can charge restaurants du ring the term of this emergency; and WHEREAS, it is in the public interest to take action to ensure the delivery of essential food services to residents of Dublin and to maximize restaurant revenue from the takeout and delivery orders that, with the exception of limited dining operations, are currently one of the primary sources of revenue for these businesses to enable restaurants to survive this crisis and remain as sources of employment and neighborhood vitality in the City; and WHEREAS, as restaurants return to modified, lower capacity restaurant service, it is unclear how restaurants will fare, as restaurants must create new, physically distanced dining areas and implement increased training and sanitation measures; and WHEREAS, it is unclear how quickly restaurant patrons will return to restaurant dining and restaurants may continue to see a significant loss of revenue for an ongoing period of time; and WHEREAS, this Urgency Ordinance is temporary in nature and only intended to promote stability and safe and healthy operations within the restaurant and food markets in the City during the COVID-19 pandemic outbreak, and to prevent avoidable business closures thereby serving the public peace, health, safety, and public welfare and ensuring jobs and economic vitality within the City, while also preventing further spread of the virus; and WHEREAS, a Staff Report was submitted to the Dublin City Council recommending approval of the Urgency Ordinance; and WHEREAS, the City Council did hear and consider all said reports, recommendations and testimony herein above set forth and used its independent judgment to evaluate the Urgency Ordinance. NOW, THEREFORE, the City Council of the City of Dublin does hereby ordain as follows: Section 1. Recitals. The recitals above are true and correct and incorporated herein by reference. Section 2. Urgency Findings and Declaration. The City Council finds and declares that there is a current and immediate threat to public health, safety and/or welfare, and this Urgency Ordinance must be adopted as an urgency matter necessary for the immediate preservation of the public peace, health, and safety. This finding is based upon the facts set forth and referenced herein, including the Recitals above, the staff report, any oral and written testimony at the September 15, 2020 City Council meeting, and the entirety of the record before the City Council. Based on said findings, facts and circumstances, the City Council finds that this Urgency Ordinance should be adopted as an urgency measure for the immediate preservation of the public peace, health and safety, and that this Urgency Ordinance is an emergency response measure aimed at ensuring the vitality and return of the restaurant industry after closure and limited operations, and should go into effect immediately as described below. Section 3. Food Service Delivery Commissions Cap and Prohibitions. 1. It shall be unlawful for a third party food delivery service to charge a covered establishment a fee or commission per online order for the use of its services that totals more than fifteen percent (15%) of the purchase price of such online order. 2. A third party food delivery service shall offer customers the option to, as a part of an online order for delivery, authorize a tip or gratuity to be paid to food delivery service workers and any covered establishment from which the customer places an order through the third-party food delivery service. It shall be unlawful for a third-party food delivery service to reduce the compensation, including any tip or gratuity, paid to any food delivery service worker, or to reduce any tip or gratuity authorized by a customer to be paid to any covered establishment as a result of the prohibitions stated in this ordinance. 3. For purposes of this ordinance, the following definitions apply: a. "Covered establishment" means a restaurant, eating or drinking establishment, or similar food facility that offers, in a single commercial transaction over the internet, whether directly or through a third party food delivery service, the sale and same- day delivery of food to customers from one or more retail locations within the City. b. "Online order" means an order placed by a customer through a platform provided by a third party food delivery service for delivery or pickup within the City. c. "Purchase price" means the menu price of an online order. Such term therefore excludes taxes, gratuities and any other fees that may make up the total cost to the customer of an online order. d. "Third party food delivery service" means any individual, firm, association, corporation or entity through any website, mobile application or other internet service that offers or arranges for the sale of food and beverages prepared by, and the same-day delivery or same-day pickup of food and beverages from a restaurant, eating or drinking establishment, or similar food facility l ocated within the City. 4. A covered establishment or food delivery service worker claiming a violation of this ordinance shall first provide written notice to the third party food delivery service of the specific section of this ordinance which is alleged to have been violated and the facts to support the alleged violation. The third party food delivery service shall have seven (7) calendar days from the date of receipt of the written notice to cure any alleged violation including but not limited to providing a refund of any charges exceeding the caps imposed herein. 5. If, after written notice is provided pursuant to section 4 above and the third party food delivery service fails to cure the alleged violation, including failing to provide a refund or continuing to charge fees in violation of this ordinance, the person or entity claiming a violation of this ordinance may bring a civil action seeking damages and injunctive relief. The prevailing party in any such action shall be entitled to an award of reasonable attorney’s fees. 6. This ordinance is not intended to, and does not, create any rights or benefits, substantive or procedural, enforceable at law or in equity, against the City of Dublin, its elected and appointed officials, its departments, officers, or employees. Section 4. Severability. The provisions of this Ordinance are severable and if any provision, clause, sentence, word or part thereof is held illegal, invalid, unconstitutional, or inapplicable to any person or circumstances, such illegality, invalidity, unconstitutionality, or i napplicability shall not affect or impair any of the remaining provisions, clauses, sentences, sections, words or parts thereof of the ordinance or their applicability to other persons or circumstances. Section 5. Effective Date. Following adoption by at least a four-fifths vote of the City Council, this Ordinance shall take effect and be enforced immediately, and shall expire one (1) year from the effective date, or upon the termination of the local state of emergency, whichever occurs first; or as otherwise terminated, modified or extended by the Dublin City Council. Section 6. Posting. The City Clerk of the City of Dublin shall cause this Ordinance to be published or posted in the manner required by law. PASSED, APPROVED AND ADOPTED this 15th day of September, 2020 by the following vote: AYES: NOES: ABSENT: ABSTAIN: _____________________________ Mayor ATTEST: ___________________________________ City Clerk 3581523.2