DoorDash will pay $16.8 million to New York delivery workers after misusing their tips

DoorDash is paying restitution after keeping tips from as many as 63,000 of its New York delivery workers thanks to a settlement with the New York Attorney General’s office, The New York Times reports. Attorney General Letitia James announced on Monday that DoorDash will pay $16.8 million, which will be spread across workers who were subjected to the company’s “guaranteed pay” model that subsidized payments against customer tips.

DoorDash will additionally pay up to $1 million in administrator costs to help make the payments happen. Some workers are expected to get several thousand dollars, others as much as $14,000, a spokesperson for the New York Attorney General’s office told The New York Times. The Office of the Attorney General will determine which workers are eligible and how much they’re repaid. DoorDash also made similar settlements with Illinois for $11.3 million in November and with Washington DC for $2.5 million in 2020.

From May 2017 through September 2019, DoorDash’s payment model would “guarantee” a certain payout to workers whether customers tipped or not. However, what the company didn’t make clear was that it was really giving a base pay of $1 and would use tips from customers before doling out money towards the guaranteed amount. For instance, if a delivery job had guaranteed payment of $10 to the worker and the customer tipped $6, DoorDash would pay the worker $1 plus the $6 tip, then fill in the remaining $3 to add up to the guarantee. If they tipped $7 or $8, the worker wouldn’t be paid anything extra — DoorDash would pocket the difference instead.

DoorDash’s model of using tips for workers’ base pay came into light in July 2019 and was met with scrutiny by the workers and customers which pushed the company to promise change in the policy. In an August 2019 response to the situation, DoorDash CEO Tony Xu tweeted that they thought they were “​​doing the right thing for Dashers by making them whole if a customer left no tip, but the feedback we’ve received recently made clear that some of our customers who were leaving tips felt like their tips didn’t matter.”

Not only was the guaranteed pay system deceitful to workers, the state complaint alleged, but it was also misleading to customers since the app promised “Dashers will always receive 100 percent of the tip,” which is only technically accurate. The New York Attorney General’s office also noted that disclosures of how tips work were buried to the point of inaccessibility during the ordering process.

During the 2021 pandemic, DoorDash and Grubhub were also sued by the city of Chicago for unfair fees and tipping policies. The case is ongoing.