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DoorDash will pay nearly $17 million in a settlement after the food delivery platform used customer tips to subsidize the wages of its delivery workers in New York instead of allowing them to keep the tips in addition to their guaranteed pay, New York Attorney General Letitia James announced Monday.
“This is just fundamentally unfair,” James, a Democrat, said at a news conference. “Customers had no reason to believe that these tips were being used by DoorDash to reduce its costs.”
Between May 2017 and September 2019, DoorDash used a guaranteed pay model that allowed Dashers to see how much they would be paid before accepting a delivery, but the company included customer tips to offset the base pay it guaranteed to workers, rather than pay the full tip amount, according to James.
Under this pay model, workers only received their tips if they were more than the amount DoorDash guaranteed to pay them for the order, James said. The company would pay a minimum of $1 to the Dasher and would use customer tips to offset the rest of the guaranteed amount.
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DoorDash will pay nearly $17 million in a settlement after the food delivery platform used customer tips to subsidize the wages of its delivery workers in New York. (Michael Nagle/Bloomberg via Getty Images / Getty Images)
For example, for orders with a guaranteed amount of $10 when a customer tipped nothing, DoorDash would pay $10 for the $1 minimum plus the $9 remainder, giving the Dasher a total of $10. But if the customer tipped $11, DoorDash would pay only the $1 minimum, leaving the Dasher with just $12.
DoorDash also misled customers into believing that their tips were going directly to the Dasher.
The company will pay $16.75 million in restitution that will be distributed to DoorDash workers who made deliveries between May 2017 and September 2019 in New York. Eligible workers will be contacted by a settlement administrator with information about how to file a claim, and DoorDash must pay up to $1 million in settlement administrator costs in addition to the restitution.
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New York Attorney General Letitia James, who announced the settlement with DoorDash, described the company’s former guaranteed pay model as “fundamentally unfair.” (Smith Collection/Gado/Getty Images / Getty Images)
“Delivery workers are integral to our communities, working tirelessly to bring food and other essentials directly to our doorsteps in all conditions,” James said in a news release. “DoorDash misled customers who generously tipped and deceived Dashers who deserved to be paid in full.”
“This settlement returns millions to the pockets of hardworking Dashers and ensures transparency in DoorDash’s payment practices going forward,” she continued. “My office will continue to protect New York workers from deceptive business practices and ensure they receive all of the money they’ve earned.”
DoorDash is also required to maintain a pay model that ensures tips are paid to Dashers in their entirety without impacting the company’s contribution to guaranteed pay. The company must additionally disclose pay policy details to Dashers and customers.
The guaranteed pay model impacted New York Dashers from May 2017 to September 2019. (REUTERS/Carlo Allegri / Reuters Photos)
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The company said the pay model used at the time is no longer in use.
“While we believe that our practices properly represented how Dashers were paid during this period, we are pleased to have resolved this years-old matter and look forward to continuing to offer a flexible way for millions of people to reach their financial goals,” DoorDash said in a statement.
