DoorDash will pay a $16.7 million settlement following an investigation into its tipping practices.
New York Attorney General Letitia James announced the settlement Monday (Feb. 24), saying her office had found that the delivery platform between 2017 and 2019 had misled its customers and workers — otherwise known as “Dashers” — by using tips to subsidize their wages.
“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.”
In a statement issued to news outlets, DoorDash said it believed that its 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.” The company added that this old pay model is no longer in use.
According to the New York Attorney General’s office, DoorDash between May 2017 and Sept. 2019 employed a guaranteed pay model that let Dashers see what they’d be paid before accepting a delivery.
The investigation found that under this model, the company used tips to offset the base pay it had promised its workers rather than giving them the full tips they had earned.
Under this “deceptive pay model,” the release added, workers could only see their tips if they were larger than the amount DoorDash had already guaranteed to pay them for the order. The company would always pay a minimum of $1 to the Dasher and would use customer tips to cover the rest of the amount it had guaranteed its worker.
And research by PYMNTS Intelligence has found that tipping isn’t always guaranteed. As shown in the report “Tipflation Is Changing Spending Habits of 1 in 6 Consumers,” consumers across all income groups said they were cutting back on spending in part because tips were driving up the cost of goods and services.
The study found that 29% of consumers felt that tipping has gotten out of hand, with respondents saying they were “universally being prompted at the point of sale to sign off on some level of suggested tipping,” PYMNTS wrote last year.
The settlement comes less than two weeks after DoorDash was sued by rival Uber, which accuses the company of “coercing” restaurants into work exclusively with its delivery service. DoorDash has said that Uber’s claims are unfounded.
