Postmates, Uber Offer Promotions for Black Restaurants, Raising Tough Legal Questions

Uber Eats
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June 10, 2020

New meal-delivery company promotions benefiting black-owned restaurants are raising legal questions about whether gig economy giants can offer race-based benefits.

The programs, announced by Uber Eats and Postmates following the death of George Floyd at the hands of police, waive delivery fees for black-owned restaurants but make no such benefit available to other minority or white-owned businesses.

The legal questions are compounded by a lack of transparency surrounding the programs and seemingly random participant criteria. Postmates has already made missteps. At least two businesses owned by white or Arab proprietors were on curated lists and searches of black-owned restaurants on the Postmates Washington-area platform as recently as Tuesday. Both restaurants told the Washington Free Beacon that they were added without consultation and were removed following the Free Beacon's inquiries.

One capital standby, the Old Ebbitt Grill, appeared on a curated list of black-owned restaurants as of Tuesday afternoon. Clyde's Restaurant Group, which owns Old Ebbitt, is operated by a team of executives, none of whom are black. A spokesperson for the Clyde's Restaurant Group told the Free Beacon that they asked Postmates to remove the restaurant, which was added without their input.

Busboys and Poets, a popular restaurant and event space which identifies as a "cultural hub where racial and cultural connections are consciously uplifted" consistently appeared as a top result on a search for "black owned" restaurants on Postmates as of Tuesday. The owner and founder of the restaurant is Andy Shallal, who was born in Iraq. A spokesperson confirmed that the restaurant was not consulted by Postmates.

Both companies have been cagey about the criteria they use to select qualifying businesses. Postmates did not respond to multiple inquiries about its program, while Uber has only identified stakeholders in its internal process. Participant restaurants are selected by groups across the company, including the Black @ Uber leadership group, with input from local groups and business associations.

Law professor David Bernstein of George Mason University's Antonin Scalia Law School said the selection process itself raises hard, legally fraught questions for the companies. The questions are especially urgent given the absence of public information about qualifying criteria and community input.

"How are Uber Eats and Postmates going to determine who is black?" he told the Free Beacon. "What if someone is a medium-skinned Brazilian immigrant? What if someone is mixed race? Puerto Rican with some black heritage?"

"Another question facing them would be what does black owned mean?" Bernstein added. "What if there are two partners, but only one is black. Do they get half-off shipping, free shipping, nothing?"

Those problems have already manifested with the inclusion of restaurants like Busboys and Poets or Old Ebbitt Grill, which are not owned or operated by black proprietors.

In theory, conditioning a benefit on race is rife with legal implications, and numerous state or local public accommodations laws would seem to prohibit the newly announced policies. In practice, on the other hand, the programs might be beyond the reach of the law, as rapid shifts in public opinion surrounding racism and civil rights will extract real costs from a plaintiff who brings a legal challenge.

Federal laws don't appear to create an issue. The closest statute on point is a law banning discrimination in contracting. Uber's policy applies only to customers, and does not alter the agreement between the company and the participating restaurant, so the contract law probably doesn't apply. The Postmates policy appears similar based on publicly available information, but compliance is difficult to evaluate since the company has been guarded in disclosing details.

State laws are another matter. Both companies are based in San Francisco, meaning they are covered by California's Unruh Civil Rights Act. That law requires businesses to provide all comers with "full and equal accommodations, advantages, facilities, privileges or services." Bernstein told the Free Beacon that the California Supreme Court ruled in 2019 that the state civil rights law covers online businesses, though that case did not involve gig economy services.

The California Department of Fair Employment and Housing, which enforces the Unruh Civil Rights Act, told the Free Beacon that it cannot offer advisory opinions on businesses practices.

Dr. Anthony Kreis, a law professor at Chicago-Kent College of Law, told the Free Beacon that state and local public accommodations laws are more likely to cause a problem, but it's not clear they cover sharing economy services like Uber. What's more, Kreis said these promotionals are novel compared with more familiar civil rights cases.

"Ultimately, there really isn't an actual denial of service or inequitable access to a service," Kreis said. "Rather these companies are incentivizing patrons to do business with a particular group of businesses at their own expense."

However, Kreis cautioned that policies which create class-based distinctions can be unlawful even if there is no bias behind the program. For example, he noted officials in New Jersey determined a restaurant that offered discounted drinks to women for a weekly "Ladies Night" violated state civil rights law because it discriminated against men.

"Benign or even benevolent motives cannot excuse discrimination that's based on stereotypes or customer preferences," Kreis told the Free Beacon. "Nor does it matter that the consequences of the policy are fairly trivial."

Supposing these programs are unlawful, Kreis predicted the social costs of bringing a legal challenge will be steep.

"My suspicion is this is ultimately going to be a test for business owners who might feel injured by these policies because any litigation could well be a public relations nightmare in and of itself no matter what the probability of success," Kreis told the Free Beacon .

The possibility of litigation will similarly test businesses' commitment to social justice causes. Whether "woke capital" is willing to sustain progressive business practices while incurring losses is an open question. Mounting attorneys' fees and prospective damages might prove too burdensome, particularly for sharing economy startups.