DoorDash to pay $22.5m to US workers for pocketing their tips

WASHINGTON - In the early days of the food delivery app explosion, DoorDash came up with a novel way to process tips that customers gave to workers: It effectively kept the money for itself.

The practice, in place for more than two years, eventually led to an outcry.

In 2019, DoorDash halted it but Dashers, as the app’s workers are called, were still out the money that the company had withheld from them.

On Feb 24, the New York attorney-general’s office announced that DoorDash would pay US$16.8 million (S$22.5 million) in restitution to Dashers.

The money will be spread among as many as 63,000 workers, and although many will receive amounts in the low thousands, some will receive as much as US$14,000, said a spokesperson for Attorney General Letitia James.

DoorDash agreed to similar settlements of US$2.5 million in Washington in 2020, and US$11.25 million in Illinois in 2024.

This is how the old system worked: If DoorDash guaranteed a worker US$7 for delivery and a customer did not tip, DoorDash would pay the worker the whole US$7.

If the customer tipped, say, US$3, then DoorDash would pay the worker only US$4 and add on the US$3 tip so that the worker would still get just US$7.

“Customers had no way of knowing that DoorDash was using tips to reduce its own costs,” the attorney-general’s office said in a statement, adding that the fine print about where the tip was actually headed was “buried in online documents”.

At checkout, DoorDash encouraged customers to tip, reminding them: “Dashers will always receive 100 per cent of the tip.”

During the time the policy was in effect, New Yorkers placed more than 11 million orders with DoorDash, the attorney general said.

At the time, DoorDash paid higher guarantees than some of the other delivery apps, which is why many Dashers still worked for the company despite this policy.

Things have changed a lot for Dashers in New York City since 2019.

There was no minimum wage for delivery app workers then. There has been one since 2023, and it is currently US$19.56 – plus tips – per hour spent making deliveries.

The hourly wage does not cover time spent waiting for orders.

Los Deliveristas Unidos, a labour advocacy group that has fought for fairer pay for delivery workers, applauded the settlement.

“Today tastes like victory,” said Ms Ligia Guallpa, the group’s executive director.

DoorDash said in a statement on Feb 24: “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.”

Asked if the company intended to make restitution to Dashers in any other states, a spokesperson replied: “Today we’re just focused on resolving this investigation and putting the allegations on this conduct from years ago behind us.”

A state administrator will contact current and former Dashers who may be entitled to restitution to help them claim it.

The Dashers will be paid a portion of the amount that was improperly withheld from them, but it is not yet clear how large a portion, the attorney general’s office said.

Mr Blake Volkan, who was a Dasher in the late 2010s, said on Feb 24 that he thought the company probably skimmed thousands of dollars of tips from him and that he looked forward to receiving payment.

“Hope the guys who worked hard get what they earn,” Mr Volkan said by text. NYTIMES