DoorDash Agrees to $16.8 Million Settlement for Withholding Worker Tips

In the beginning, when food delivery apps became popular, DoorDash came up with a way to handle tips in a way that benefited the company more than its workers. For over two years, DoorDash effectively took the tips that customers gave to workers instead of passing them on. This practice caused a lot of complaints, and in 2019, DoorDash decided to stop it. However, the workers, known as Dashers, still lost out on the money that DoorDash had kept from them during that time.

Recently, the New York attorney general’s office announced that DoorDash will pay $16.8 million to compensate the Dashers. This money will be shared among about 63,000 workers. While many of them will receive a few thousand dollars, some could get as much as $14,000, according to the attorney general’s spokesperson, Letitia James.

DoorDash has faced similar issues in other places too. In 2020, the company agreed to pay $2.5 million in a settlement in Washington, D.C., and last year, it settled for $11.25 million in Illinois regarding the same problem of misusing tips.

So, how did this system work before? DoorDash had a guarantee for workers that they would receive a minimum of $7 for each delivery. If a customer didn’t leave a tip, the worker received the full $7 from DoorDash. However, if the customer gave a $3 tip, DoorDash would only pay the worker $4 because they would use the tip to cover the difference, meaning the worker still got just $7. Customers had no idea that their tips were being used to lower the company’s costs. The New York attorney general’s office pointed out that the details about how tips were handled were hidden in fine print in online documents.

The implications of this practice were significant for the workers, who relied on tips as part of their income. The situation raised questions about transparency and fairness in the gig economy, where many workers do not have traditional employment benefits.

Moreover, such practices highlight a broader issue in the gig economy regarding the treatment of workers. This revelation has led to increased scrutiny of app-based companies and how they handle not just pay but also worker rights. As consumer awareness grows, more people are concerned about how their money impacts not just the businesses they support but also the workers who provide essential services.

In conclusion, DoorDash’s handling of tips created a financial burden for many of its workers, which has sparked legal action and settlements in several locations. The latest settlement in New York serves as a reminder of the importance of fair compensation and transparency in the gig economy, as cities and states continue to address the balance between company profits and worker rights.