(Credit: Yuki Iwamura/Bloomberg via Getty Images)
DoorDash has agreed to pay $16.75 million to settle a tip-withholding case brought by the New York attorney general.
The settlement will be distributed among 63,000 delivery workers who received unfair pay under DoorDash’s guaranteed pay model that ran from May 2017 to September 2019.
Under the program, delivery workers (aka Dashers) could see the fixed amount they’d receive for each order before accepting it. However, once the delivery was complete and the customer tipped, DoorDash used the tip to “offset the base pay it had already guaranteed to workers, instead of giving workers the full tips they rightfully earned,” according to New York Attorney General Letitia James.
For example, if the guaranteed amount was $10, and the customer tipped an extra $3, DoorDash would take the tip and keep the Dasher’s pay at $10, using the extra money to reduce its own costs.
The AG found the entire model to be deceptive. On the app’s checkout page, customers were shown a message that read, “Dashers will always receive 100 percent of the tip," while he truth about the tip was “buried in online documents and inaccessible during critical moments in the ordering process,” James says. “Customers had no way of knowing that DoorDash was using tips to reduce its own costs.”
As The New York Times notes, the guaranteed pay model was halted in 2019 following an outcry from customers who found out how their tips were being allocated.
When the program was live, approximately 63,000 Dashers completed 11 million orders. A settlement administrator will now contact the impacted delivery workers via mail, email, and/or text and provide them with information on how to file a claim, James said.
Some of the Dashers would receive amounts in the low thousands, while some may receive as much as $14,000, a spokeswoman for James tells the Times.
The settlement announcement comes just weeks after Uber sued DoorDash over another unlawful practice. Per the lawsuit, DoorDash has been forcing restaurants to accept it as an exclusive partner for first-party deliveries or risk being demoted or removed from the app, thereby hampering Uber Eats’ potential growth.
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