DoorDash will pay $16.75 million in a settlement over claims that it misused customer tips to lower delivery workers’ wages in New York. The company used this controversial practice between May 2017 and September 2019.
New York Attorney General Letitia James called the pay model “fundamentally unfair.” She explained that customers believed their tips went directly to workers, but DoorDash used them to reduce its costs instead of paying workers the full amount.
For example, DoorDash guaranteed delivery workers $1 per order. If a customer tipped $11, the company paid only the $1 minimum, leaving the worker with just $12 instead of $22. If no tip was given, DoorDash would pay the rest to meet its guarantee.
This approach left many delivery workers underpaid and misled customers. DoorDash will now reimburse workers who delivered between May 2017 and September 2019 in New York. The company will also pay up to $1 million in costs to administer the settlement.
The company must adopt a new pay model where tips go entirely to delivery workers without affecting their guaranteed pay. DoorDash must also clearly disclose its pay policy to both workers and customers.
DoorDash states that the disputed pay model is no longer in use. The company expressed its satisfaction in resolving the issue and reaffirmed its commitment to providing flexible work opportunities for delivery workers.
This settlement ensures transparency in DoorDash’s payment practices, protecting the rights of workers and ensuring they are fairly compensated.
