Drivers to be Paid Millions for Pocketed Tips
The New York attorney general’s office announced a nearly $17 million DoorDash settlement after the delivery platform used tips intended for drivers to subsidize their pay.
What Happened?
On Feb. 24, New York Attorney General Letitia James said in a press release that between May 2017 and September 2019, an Office of the Attorney General (OAG) investigation found that the delivery platform “used customer tips to offset the base pay it had already guaranteed to workers, instead of giving workers the full tips they rightfully earned.”
AG James said that customers were misled into thinking their tips would be directly given to delivery workers, aka Dashers. Instead, DoorDash would keep the tips and take it out of their guaranteed pay.
What did DoorDash Say?
In a statement to TODAY.com, a DoorDash spokesperson says it remains committed to making sure Dashers’ earnings are “fair and transparent” and that the company hasn’t used the same pay model since 2019.
“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.”
The spokesperson added, “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.”
What did the Investigation Find?
According to the settlement, the OAG investigation found that under the older pay model, workers were only able to see their tips if the amount was greater than what DoorDash had guaranteed to pay them for the order.
For example, for orders with a guaranteed $10 earnings from DoorDash, if a customer tipped between $0 to $9, the Dasher would always receive $10.
Example:
- If a customer tipped $9, DoorDash would pay $1 ($1 + $0 remainder). The Dasher still only received $10.
- If the customer tipped $11, DoorDash would pay $1 ($1 + $0 remainder). The Dasher only received $12.
The AG said that the company failed to disclose this information while having the message, “Dashers will always receive 100 percent of the tip,” at checkout.
“Customers had no way of knowing that DoorDash was using tips to reduce its own costs,” said James.
Who is Eligible for Compensation?
Dashers who delivered for DoorDash between May 2017 and September 2019 in the state of New York may be eligible to file a claim for this settlement.
The investigation found that about 63,000 New York delivery workers were affected.
Eligible drivers will be contacted by the settlement administrator by mail, email, and/or text with notices of the settlement and information on how to file a claim. Payments are expected to begin in early 2025.
James said an administrator would be setting up a website for claims.
What Happens Next?
DoorDash will have to revise its payment practices, enhance transparency when it comes to their pay policy details, and improve dash history access, the press release stated.
Andrew Wolf, an assistant professor at Cornell University’s School of Industrial & Labor Relations who studies the gig economy, said he believes that while the ruling is good for gig workers, similar infractions may continue to happen.
“The NYAGs settlement today with DoorDash is the latest example of how gig companies’ failure to be transparent about how their algorithms operate results in wage theft, unpredictability, and shifts all the burdens of gig work on to workers,” Wolf said in a statement shared with TODAY.com. “The apps refusal to explain to workers how wages are determined and the apps constant experimentation and unilateral changes in how their algorithms work creates extreme problems for this low-wage workforce.”
Conclusion
The settlement is a significant step towards ensuring that gig workers are fairly compensated for their work. However, experts like Wolf believe that similar issues may continue to arise due to the lack of transparency in the gig economy.
Frequently Asked Questions
* Who is eligible for compensation? Dashers who delivered for DoorDash between May 2017 and September 2019 in the state of New York.
* How many delivery workers were affected? About 63,000 New York delivery workers were affected.
* When will payments begin? Payments are expected to begin in early 2025.
* How can I file a claim? Eligible drivers will be contacted by the settlement administrator by mail, email, and/or text with notices of the settlement and information on how to file a claim.
