DoorDash to settle New York lawsuit over misleading tipping practices by paying $17 million

DoorDash has reached an agreement with the New York Attorney General over an old practice wherein the company used customers’ tips to subsidize its drivers’ pay. As the office of New York AG Letitia James explained, its investigation had revealed that DoorDash wasn’t giving its drivers the tips customers sent them through the app from May 2017 through September 2019. Now, the company will pay $16.75 million in restitution that will be divided between 63,000 drivers. The Attorney General told The New York Times that a lot of drivers will receive payments in the low thousands, but some will get as much as $14,000.

Within the two-year period mentioned above, the service promised Dashers a guaranteed pay for each delivery. When customers checked out an order, they saw a message that said: “Dashers will always receive 100 percent of the tip.” Most customers reading that would take it as their driver will get what they were tipping them on top of their payment. Instead, the service used their tips to cover the drivers’ guaranteed pay. If a customer tipped $6 for an order with a guaranteed payment of $10, for instance, DoorDash would only pay $4 out of its own pocket. That means the driver would still only get $10 instead of $16.

“DoorDash misled customers who generously tipped and deceived Dashers who deserved to be paid in full. This settlement returns millions to the pockets of hardworking Dashers and ensures transparency in DoorDash’s payment practices going forward,” James said in a statement. In 2020, DoorDash also settled a similar lawsuit in Washington, DC for $2.5 million. It settled another lawsuit of the same nature in Illinois last year for $11.25 million.

The company ended its unfair tipping practices in 2019. In New York, app-based delivery companies are now required to pay their drivers a minimum wage that’s currently set to $19.56 per hour, not including the tips they get from customers.