By Hank Russell
Attorney General Letitia James announced a $16.75 million settlement with delivery platform DoorDash. James said the San Francisco-based delivery platform defrauded both consumers and delivery workers (known as “Dashers”) by using tips intended for Dashers to subsidize their guaranteed pay. Under this settlement, more than 60,000 delivery workers in New York State will be eligible to receive any lost tips.
According to the OAG’s office, between May 2017 and September 2019, DoorDash used a guaranteed pay model that let Dashers see how much they would be paid before accepting a delivery. An investigation found that under this model, DoorDash used customer tips to offset the base pay it had already guaranteed to workers, instead of giving workers the full tips they rightfully earned. In addition, under DoorDash’s pay model, workers were only able to see their tips if they were greater than the amount DoorDash had already guaranteed to pay them for the order. DoorDash would always pay a minimum of $1 to the Dasher and would use the tips paid by the customer to offset the rest of the amount guaranteed to the delivery worker.
For example, for orders with a guaranteed amount of $10:
- If a customer tipped $0, DoorDash would pay $10 ($1 + $9 remainder). The Dasher received $10.
- If a customer tipped $3, DoorDash would pay $7 ($1 + $6 remainder). The Dasher still only received $10.
- If a customer tipped $6, DoorDash would pay $4 ($1 + $3 remainder). The Dasher still only received $10.
- 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.
Customers were misled into believing their tips would directly benefit Dashers, according to the OAG. Instead, DoorDash would keep the tips meant for Dashers and take it out of their guaranteed pay. DoorDash would guarantee pay to a delivery worker, and then only actually pay them whatever the tip did not cover.
DoorDash also failed to clearly disclose these practices to customers and Dashers, James said. At checkout, customers were encouraged to tip with a message reading “Dashers will always receive 100 percent of the tip.” Disclosures about the use of tips were buried in online documents and inaccessible during critical moments in the ordering process. Customers had no way of knowing that DoorDash was using tips to reduce its own costs.
Attorney General James has secured $16.75 million in restitution from DoorDash, which a settlement administrator engaged by OAG will distribute directly to Dashers affected by the deceptive pay model, providing them the compensation they were denied. Any worker who delivered for DoorDash between May 2017 and September 2019 in New York state may be eligible to file a claim for this settlement. During that period, New Yorkers placed more than 11 million delivery orders with DoorDash and approximately 63,000 New York delivery workers stand to benefit from this settlement. Payments are expected to begin in early 2025. Eligible drivers will be contacted by the settlement administrator via mail, email, and/or text with notices of the settlement and information on how to file a claim.
In addition to the restitution fund, DoorDash must:
- maintain a pay model that ensures consumer tips are paid to Dashers in their entirety, without impacting DoorDash’s contribution to guaranteed pay
- clearly disclose pay policy details to both Dashers and consumers, and share a breakdown of base pay, promotional bonuses, and tips with Dashers for every delivery
- allow Dashers to have access to their delivery history for at least four years, even if it has been deactivated
“Delivery workers are integral to our communities, working tirelessly to bring food and other essentials directly to our doorsteps in all conditions,” James said. “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. My office will continue to protect New York workers from deceptive business practices and ensure they receive all of the money they’ve earned.”
A DoorDash spokesperson said they are “pleased” that this “years-old matter” has finally been taken care of. The spokesperson went on to say that the business model in question has not been used in six years.
“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,” the spokesperson said. “To be clear: Dashers always keep 100% of tips from orders on the DoorDash app. 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.”