Settlement for DoorDash Drivers

Long-Overdue Tips to be Paid

DoorDash drivers in New York are set to receive an additional payment, one that they have been entitled to for over five years. According to a settlement announced by New York State Attorney General, Letitia James, DoorDash has agreed to pay $16.75 million to over 60,000 drivers. These drivers, known as Dashers, were supposed to receive this money as tips but instead, the company utilized it to cover base pay and retained the remaining amount.

Background of the Lawsuit

The lawsuit filed by New York alleged that between May 2017 and September 2019, tens of thousands of Dashers were misled by DoorDash’s pay model. At that time, the company offered a guaranteed wage to drivers, which was the minimum amount they could expect to earn from a job. However, instead of paying this guarantee and allowing drivers to keep their tips, DoorDash counted the tip toward their base pay and kept the remaining amount.

DoorDash’s Payment Model

To illustrate, let’s consider an example: if a driver was guaranteed $10 on a delivery, DoorDash would pay a minimum of $1, and the rest would be based on the tip left by the customer. If the customer tipped $5, DoorDash would count that toward the guaranteed $10 wage and cover the remaining $4 on top of its $1 minimum. If the tip was $7, DoorDash would reduce its payment to $2. Under this model, the driver would only receive more than the guaranteed $10 if the customer tipped higher than the guaranteed payment.

Lack of Transparency

This payment model was questionable, even if DoorDash had accurately explained how payments were distributed. However, the company did not provide clear explanations. According to the Attorney General’s lawsuit, DoorDash displayed a message to customers stating that "Dashers will always receive 100 percent of the tip," which, although technically true, did not clarify that the "tip" was actually part of the delivery drivers’ wage. New York argued that the disclosures explaining how tips worked were buried in online documents, and customers were unaware that DoorDash was using tips to reduce its own costs.

Changes to the Payment Model

DoorDash eventually changed its payment model to ensure that drivers’ earnings would increase by the exact amount a customer tipped on every order. However, New York’s case represents drivers finally receiving the tips they earned during the period when the company was less transparent about who was pocketing the extra cash.

Settlement Distribution

Dashers eligible for the settlement will be contacted by the settlement administrator to receive their share of the payment that was rightfully theirs. Although it has taken a long time, the drivers will finally receive the tips they earned.