Posted by Melissa Guerbi.
DoorDash, a food delivery platform that is used worldwide, has agreed to pay nearly $17 million in a settlement after it was found to have used customer tips to subsidize delivery workers’ wages instead of paying them directly. According to New York Attorney General Letitia James, “Between May 2017 and September 2019, DoorDash used a guaranteed pay model that allowed Dashers to see how much they would be paid before accepting a delivery, but the company included customer tips to supplement the base pay it had promised workers, rather than pay the full tip amount”. This practice misled both delivery workers and customers, who believed their tips were fully going to the workers.
As part of the settlement, $16.75 million will be given to affected Dashers who worked in New York during that period. Eligible workers will receive information on how to file claims, while DoorDash will also cover up to $1 million in administrative costs related to the settlement. Additionally, the company is required to uphold an open and honest payment system that guarantees that workers receive the full amount of their tips. James emphasized the importance of fair wages, stating, “This settlement returns millions to the pockets of hardworking Dashers and ensures transparency in DoorDash’s payment practices going forward.”
This case highlights the challenges gig workers face in ensuring fair compensation. Many food delivery platforms rely on pay structures that can sometimes hide how much workers are actually earning. Customers who tipped generously likely felt let down after hearing that their tips were used towards DoorDash’s labor costs rather than directly benefiting the worker, as they intended to do. This agreement is a step in the right direction, ensuring that big companies remain accountable and workers receive the full pay they deserve for the amount of work they do. Unfortunately, DoorDash is not the first company to suffer because of its tipping and payment policies. With the growing gig economy, stronger regulations are needed to prevent similar practices and protect workers’ earnings. The ruling acts as a warning to gig economy companies, and highlights the importance of revision of any unclear or unfair policies.
Melissa is a finance and technology major at the Stillman School of Business, Seton Hall University, Class of 2027.
Link: https://www.foxbusiness.com/economy/doordash-pay-new-york-delivery-workers-nearly-17-million-using-tips-subsidize-wages