The food delivery company DoorDash will have to pay its employees $16.75 million to settle a lawsuit that accused it of helping itself to the tips customers gave to delivery workers.
New York State Attorney General Letitia James, announced on Feb. 24 that an investigation by her office found that between May 2017 and September 2019, DoorDash used funds from customer tips to help pay the wages it owed to delivery workers. She characterized DoorDash’s actions as misleading and a “bait and switch.”
The company led customers to believe that their tips were augmenting the wages of delivery workers, who are known as Dashers. Instead, customers were providing DoorDash with extra funds to cover company expenses — the costs associated with paying its employees.
The settlement agreement with the attorney general notes that “DoorDash … matched the placed order with a Dasher by presenting a nearby Dasher with an offer to deliver the order. This offer was presented to the Dasher through the DoorDash app and included a map showing the delivery route and distance, an estimated time to complete the delivery, a summary of the items to be delivered, and guaranteed pay for completing the delivery. The Dasher had a limited time in which to accept or decline the offer … [C]onsumers utilizing DoorDash would have expected that the ‘tip’ added to the delivery charge through the DoorDash checkout screen would be provided to the Dasher on top of the Guaranteed Amount promised by DoorDash for the delivery. But … that was not the case. Instead, DoorDash used consumer tips to subsidize the Guaranteed Amount payment it promised to Dashers.”
“DoorDash subsidized the base pay that they had already guaranteed workers,” James said at a press conference as she announced the settlement. “DoorDash encouraged customers to tip and assured them at checkout that ‘Dashers will always receive 100 percent of the tip.’ But that just wasn’t really true.”
Worker advocates applauded the action by the attorney general. “Today, New York City sees what we’re up against and how much more work there is to do to fight back against the predatory labor practices that this industry is built on,” said Ligia Guallpa, executive director of the Worker’s Justice Project and co-founder of Los Deliveristas Unidos, in a statement about the settlement. “… [T]his also shows the collective power of workers and what we can accomplish when we’re united in solidarity with each other and with allies who are willing to hold exploiters accountable. Thank you Attorney General James for being a true friend to workers. And shame on you, DoorDash! While they lie and steal at scale, we are organizing at scale and building collective worker power.”
The settlement agreement shows that DoorDash “does not admit” to the accusations held against it. In a statement, a DoorDash spokesperson said, “We remain committed to making sure that Dasher earnings are always fair and transparent, and the allegations settled were related to an old pay model that was retired in 2019. To be clear: Dashers always keep 100% of tips from orders on the DoorDash app.
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 consented to change its pay model so Dashers can receive their entire tips. The company’s app will now display a payment model that gives Dashers and customers a breakdown of how payments and tips are distributed, and Dashers will be able to access their payment history with the company for up to four years — even after their work accounts have been deactivated.
More than 60,000 people who have been DoorDash delivery workers are expected to receive compensation from the announced settlement fund. Once the attorney general’s office puts a settlement administrator in place, eligible Dashers will be notified and receive claim numbers that they can use to file for payment online.
“Any worker who delivered for DoorDash between May 2017 and September 2019 in New York state may be eligible to file a claim for this settlement,” according to the attorney general’s press statement. “During that period, New Yorkers placed more than 11 million delivery orders with DoorDash and approximately 63,000 New York delivery workers stand to benefit from this settlement. Payments are expected to begin in early 2025. Eligible drivers will be contacted by the settlement administrator via mail, email, and/or text with notices of the settlement and information on how to file a claim.”