The delivery platform DoorDash is paying $16.75m to settle an investigation conducted by New York authorities that charged the company with using tips from customers to subsidize workers’ base pay.
Between May 2017 and September 2019, DoorDash used a guaranteed pay model to show delivery workers how much they would make before accepting a delivery. The investigation by the New York attorney general, Letitia James, found that under this model DoorDash used tips from customers to offset the base pay it guaranteed to workers rather than giving them the full tips.
Workers were only able to see tips if they were greater than the base pay the app had already guaranteed to pay, with the company paying at least $1 and then using tips to subsidize the rest of the guaranteed wage.
According to the attorney general’s office, if a customer tipped nothing, the delivery worker would receive the full amount of guaranteed pay for the delivery, such as $10, but if the customer tipped $3 on top that, they would still only receive $10 for the order. Despite the system, DoorDash encouraged customers to tip at checkout, claiming 100% of tips would go to workers.
The settlement includes $16.75m in restitution for workers and up to $1m in settlement administrator costs to help issue the payments to current and former delivery workers. Some workers could receive as much as $14,000.
“I have been delivering for DoorDash since they started, but I do not work for them as much any more because the system was not clear and they were taking our tips,” said Lee Vaughn, a “dasher” with DoorDash since 2016. “DoorDash never told us accurate distances and the payment amount they would promise was not always true. They would show us an amount plus tips, but they were not telling us the truth. We worked hard and we deserve to be paid.”
During the time period in which the model was used, more than 11m orders were placed through the app, affecting 63,000 delivery workers in New York. Similar settlements have been reached in Washington DC in 2020 for $2.5m and in Illinois in 2024 for $11.25m.
“DoorDash misled customers who generously tipped and deceived Dashers who deserved to be paid in full,” said James, the New York attorney general. “This settlement returns millions to the pockets of hardworking Dashers and ensures transparency in DoorDash’s payment practices going forward. My office will continue to protect New York workers from deceptive business practices and ensure they receive all of the money they’ve earned.”
DoorDash said in a statement: “We remain committed to making sure that Dasher earnings are always fair and transparent, and the allegations settled were related to an old pay model that was retired in 2019. To be clear: Dashers always keep 100% of tips from orders on the DoorDash app. While we believe that our practices properly represented how Dashers were paid during this period, we are pleased to have resolved this years-old matter and look forward to continuing to offer a flexible way for millions of people to reach their financial goals.”
