NEW YORK – Delivery service provider DoorDash is set to pay nearly $17 million to resolve allegations that it improperly utilized customers’ tips to bolster its delivery workers’ wages in New York, instead of allowing drivers to retain tips in addition to their guaranteed earnings. This announcement was made by Attorney General Letitia James on Monday.
According to James, the controversial pay model was in effect between May 2017 and September 2019. During this time, DoorDash assured workers a minimum payment per delivery but included customer tips as part of that minimum, effectively only paying out the balance if tips did not cover it, as explained by the attorney general.
A significant issue, James noted, was the lack of transparency to DoorDash’s customers. They were not informed that their gratuities were essentially subsidizing the company’s wage obligations to its workers. “This practice was fundamentally unfair,” James stated during a press conference in Manhattan. “Customers had no reason to believe their tips were being diverted to reduce DoorDash’s expenses.”
As part of the settlement, DoorDash will distribute $16.75 million in restitution to delivery workers who operated between May 2017 and September 2019 within New York. A settlement administrator will reach out to those eligible to receive compensation.
In its response, DoorDash maintained that its pay practices were correctly represented during the mentioned period, but expressed satisfaction in resolving the longstanding issue. “While we believe our methods accurately depicted how Dashers were compensated, we are glad to put this matter behind us and are committed to providing a flexible payment model that supports financial achievement for many,” the company stated.
DoorDash has confirmed that this previous pay model is no longer being utilized.
