New York AG Settles with DoorDash for $16.75 Million Over Misused Tips, 63,000 Workers to Receive Restitution

New York Attorney General Letitia James recently finalized a $16.75 million settlement with DoorDash after an investigation exposed how the food delivery service used customer tips to underwrite its guaranteed pay to workers rather than pass them along fully to their delivery personnel. The probe, which covered the period between May 2017 and September 2019, revealed that DoorDash's payment model improperly distributed the tips customers believed were going directly to their "Dashers."

Under DoorDash's previous system, the company promised workers a guaranteed minimum for each delivery. However, if a customer tipped on an order, that tip would often be absorbed into the guaranteed amount, not given in addition to it. For instance, in an order with a $10 guaranteed pay, the Dasher would receive $10 regardless of whether a customer tipped anything extra. According to a statement from the Attorney General's office, if a customer did not tip, DoorDash would cover the whole amount; if the customer tipped $9, the company would only contribute $1, effectively negating the tip for the worker's earnings.

This settlement means restitution for around 63,000 New York-specific DoorDash delivery workers, with payments expected to commence in early 2025. Yet, the implications of this case could rattle the gig economy nationwide as it casts a harsh spotlight on the practices of the burgeoning tech-assisted food delivery industry. Those affected will be contacted by a settlement administrator with instructions on how to file a claim for their part of the restitution funds.

DoorDash must also make significant adjustments to its payment and transparency practices as per the settlement terms. Now required to maintain a pay model where customer tips do not affect DoorDash's contribution to base pay, the company must provide a breakdown of earnings for every delivery. This aims to prevent the past opacity that ensconced DoorDash's use of tips to supplement base pay instead of adding it as additional compensation. "Delivery workers are integral to our communities, working tirelessly to bring food and other essentials directly to our doorsteps in all conditions," Attorney General James told the press, as noted by the Attorney General's office.

Advocates for workers in the gig economy see the settlement as a significant victory in the broader fight for labor rights. "This settlement shows the scale at which DoorDash steals from its workers and the scale at which it lies," Ligia Guallpa of the Worker's Justice Project and Los Deliveristas Unidos stated, as reported by AG James' press release.