[co-author: Stephanie Kozol]*
The New York Attorney General’s (AG) Office announced a $16.75 million settlement with DoorDash, the prominent delivery platform. The settlement relates to claims that DoorDash misled both consumers and delivery workers (Dashers) regarding the handling of tips. Specifically, AG Letitia James alleged that DoorDash employed a guaranteed pay model that was supposed to ensure that delivery workers knew their pay upfront. However, DoorDash allegedly used the model to redirect customer tips to subsidize the wages the company had guaranteed to the Dashers. Instead of giving Dashers the full tips as intended, the tips were used to reduce DoorDash’s payment obligations that were needed to satisfy the guaranteed payment amount.
The AG found that DoorDash failed to disclose its practices to both Dashers and customers. Customers were led to believe that their tips would directly benefit Dashers, with disclosures stating, “Dashers will always receive 100 percent of the tip,” when in fact they were offsetting DoorDash’s pay liabilities. The disclosures were also not easily accessible by customers during the ordering process.
DoorDash will pay $16.75 million in restitution for Dashers and up to $1 million in settlement administrator costs to help issue the payments. In addition to the monetary obligation, DoorDash must take the following steps to enhance transparency and ensure fair pay practices:
- Revise Payment Practices: DoorDash must maintain a pay model that ensures consumer tips fully reach Dashers without affecting DoorDash’s contribution to guaranteed pay.
- Enhance Transparency: The company is required to clearly disclose pay policy details to both Dashers and consumers, including a breakdown of base pay, promotional bonuses, and tips for each delivery.
- Improve Dash History Access: Dashers, including those who no longer deliver for DoorDash, will have access to their delivery history for at least four years.
Why It Matters
AGs are increasingly focused on the gig economy and protecting workers in the labor-for-hire roles. This is not the first instance of DoorDash facing scrutiny over its tip policies. Last year, Illinois AG Kwame Raoul secured a settlement requiring DoorDash to pay $11.25 million for misleading conduct related to tips. Enforcement actions such as the one against DoorDash is a reminder to companies that they must be transparent when it comes to both consumer expenses and compensation for laborers. Any perceived attempt to mislead in these respects could draw regulatory scrutiny.
*Senior Government Relations Manager
