DoorDash has agreed to pay $16.75 million to settle allegations that it misled consumers and used customer tips to subsidize driver wages.
According to Business Insider, the settlement will be distributed among approximately 60,000 delivery workers – also known as Dashers – with payouts ranging from $10 to $14,000 per worker, New York Attorney General Letitia James announced on Monday, February 24.
James alleged that between May 2017 and September 2019, DoorDash used “customer tips to offset the base pay it had already guaranteed to workers, instead of giving working the full tips they rightfully earned.”
For example, if a Dasher was offered a guaranteed $10 delivery fee and the customer didn’t tip, DoorDash would pay the full $10.
However, if the customer tipped $5, instead of adding it to the $10, DoorDash would count that tip toward the guaranteed amount—paying only $5 from its own funds.
In simple terms: Instead of treating tips as extra earnings, DoorDash used them to cover what it was already supposed to pay.
“The practice was kept secret from customers and delivery workers,” James said. “Dashers didn’t know that their tips weren’t adding to their income, and customers had no idea their tips weren’t subsidizing their Dashers’ incomes and were instead helping the company save money.”
@lshift.media DoorDash pays $17M after misusing customer tips for worker pay #doordash #delivery #rips #lshiftmedia ♬ original sound – left.shift
New York, which worked alongside Illinois and Washington, D.C., on the investigation, obtained internal communications revealing that DoorDash executives were concerned Dashers would “figure out” what was going on, James told reporters.
“DoorDash executives knew how deceptive this policy was,” she said. “They knew it wasn’t right, but they did it anyway.”
As part of the settlement, the New York Attorney General’s office will set up a website for Dashers to claim their payments.
The delivery platform will also be required to end its tip-sharing practice and improve transparency in how tips are handled.
Additionally, for the next three years, the company will have to submit compliance reports to the AG’s office every six months.
In response, a DoorDash spokesperson told USA Today that the allegations were related to an old pay model that was retired in 2019. The company also expressed satisfaction in resolving the matter and emphasized its commitment to fair and transparent Dasher earnings.
“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,” the spokesperson said.
