Key Takeaways

• The Delivery Protection Act would mandate direct employment for core delivery and warehouse workers at covered NYC facilities, eliminating the subcontractor model for those functions

• Workers’ compensation exposure would increase due to larger covered workforces, higher claim volume, the loss of independent-contractor defenses, and curtailed liability-shifting to subcontractors

• Facility operators retaining non-employees for covered services would face a $500,000 bond per worker, available to satisfy third-party road-incident judgments

• The Department of Consumer and Worker Protection (DCWP) would enforce the Act with civil penalties of $1,000 – $2,500/day, reinstatement and back-pay remedies, and a private right of action

On August 10, New York City Mayor Zohran Mamdani announced support for Council Member Tiffany Cabán’s proposed Delivery Protection Act. The bill would require workers performing core delivery and warehouse services at covered New York City last-mile facilities to be directly employed by the facility operator, barring subcontractors for those functions. The bill would apply to any business using third-party delivery contractors for NYC last-mile operations. As of the time of this article, the bill is pending a vote.

What Is the Delivery Protection Act?

The Act would regulate NYC “last-mile” delivery warehouses where packages are sorted and dispatched for final delivery. Key mechanisms include Department of Consumer and Worker Protection (DCWP) licensing of last-mile facilities; direct employment of core delivery and warehouse workers; limits on subcontracting; worker safety, training, and recordkeeping requirements; advance termination notice and anti-retaliation protections; and administrative enforcement with civil penalties and a private right of action.

Direct Employment Requirement and Workers’ Compensation Impact

The Act’s most consequential provision prohibits subcontracting core delivery and warehouse work. Such workers would have to be directly employed by the facility operator. Although the Act would not directly amend New York Workers’ Compensation Law, it would reshape the employment relationship at covered facilities and produce several practical consequences:

• Increased claim volume and indemnity exposure. Companies with limited direct delivery staff would face claims from a substantially larger workforce. Contractual liability-shifting to subcontractors would be curtailed, as indemnification provisions that historically allocated liabilities to subcontractors may no longer be available.
• Narrowing of independent-contractor defenses. The Act would largely eliminate the defense that an injured worker was an independent contractor by requiring direct employment of core delivery and warehouse workers.
• The $500,000 bond. If a company continues using non-employees for covered services, it must post a $500,000 bond per retained delivery worker, available to satisfy judgments by third parties injured in road incidents involving those workers.

Gig Economy Implications

The Act is targeted, not universal: coverage depends on a facility’s function, not its label. Platforms using a qualifying NYC facility (quick-commerce grocery, pharmacy, or dark-store fulfillment) may have exposure and should not assume gig-worker classifications will avoid the Act.

Enforcement and Potential Penalties

The DCWP would enforce the Act. The Commissioner may investigate and seek corrective action; Corporation Counsel may bring court proceedings. Proposed civil penalties include:

• Direct-employment requirement violations: $1,000 per day
• Failure to satisfy recordkeeping and safety obligations for contracted workers: an additional $1,000 per day
• Violations of termination-notice requirements: reinstatement, 30 days’ wages, and an additional $500 per day
• Unlawful discharge: lost wages and benefits, a $2,500-per-day penalty, and equitable relief, including reinstatement

Considerations for Carriers, Self-Insured Employers, and TPAs

For Workers’ Compensation Insurance Carriers:

• Reassess risk and pricing for NYC delivery and warehouse businesses. If proposed legislation converts contractor-based delivery and warehouse workers into direct employees, payroll exposure would increase significantly, driving up workers’ compensation costs and premiums.
• Plan for more injury claims, and for those claims to cost more.
• Review customer agreements with former contractors, especially indemnity provisions, as they may affect third-party recovery where another party was at fault.

For Self-Insured Employers with NYC Last-Mile Operations:

• Identify every NYC last-mile facility your organization operates directly or through subcontractors and estimate how many workers will become direct employees if the bill passes as drafted.
• Assess how a larger direct workforce would affect claim costs, retention levels, and required cash or security reserves.
• Evaluate whether continued use of non-employees for covered services is viable given the proposed $500,000-per-worker bond and compare that cost against the cost of direct employment.
• Strengthen driving, route, training, disciplinary, and employment recordkeeping now, particularly for contracted delivery personnel, because these records will be central to defending the higher volume of claims a direct-employment mandate would generate.

For Third-Party Administrators:

• Prepare claim systems for newly covered workers at affected NYC locations, including contractors who become employees.
• Coordinate early with carriers and self-insured clients on claim responsibility, management protocols, and treatment of existing contractor claims during the transition to direct employment.
• Build a reliable way to collect and safely store employment, driving, and training records. These records are becoming increasingly important when responding to claims, so point out to your clients any records that are missing or incomplete.

If you have questions about how the NYC Delivery Protection Act impacts your business, please contact:

• Quinlyn A. Beaver
• Kristen L. Romano
• Philip Unwin
• Or another member of our Workers’ Compensation practice group