NEW YORK (Diya TV) — DoorDash will pay $16.75 million to resolve claims that it deceived customers and shortchanged delivery workers by diverting customer tips to help subsidize their wages, New York Attorney General Letitia James announced Monday.
The probe found that from May 2017 to September 2019, DoorDash used customer tips to cover the base pay guaranteed to its delivery employees, called Dashers, rather than contributing the tips to their pay. Customers were not informed about the practice, as they thought the tips would directly supplement the workers’ wages.
“DoorDash misled customers who tipped generously and misled Dashers who were entitled to be paid in full,” Attorney General James said. “This settlement puts millions back in the pockets of hardworking Dashers and ensures transparency in DoorDash’s payment practices in the future.
Part of the settlement is that over 60,000 impacted Dashers will be issued restitution payments from $10 up to $14,000 based on the volume of deliveries made during the designated period. DoorDash also promised to make policy changes to be transparent in payment policies and stop misusing tips.
In a response, DoorDash explained that although it holds the belief that its practice “appropriately reflected how Dashers were paid over this period,” it is happy to have been able to close out the matter and to continue to “provide a flexible way for millions of people to meet their financial aspirations.” The firm pointed out that the pay model it used in this instance is now no longer available.
This settlement comes on the heels of a similar case in Illinois, in which DoorDash agreed to pay $11.25 million for its tipping practices.
In a separate development, Uber Technologies sued DoorDash last month, alleging that the company engaged in anticompetitive behavior. Uber claims that DoorDash forced restaurants into exclusive deals, driving up costs for restaurants and consumers. DoorDash has denied these claims, calling them baseless.
Such legal hurdles point towards mounting oversight over commercial operations of food delivery ventures amid high industry growth, particularly through the height of the COVID-19 outbreak.
