AP Business Writer
NEW YORK (AP) — The attorney general of Washington D.C. is suing DoorDash, saying the food delivery service pocketed tips that customers thought were going to delivery workers.
The lawsuit, filed Tuesday, seeks to recover millions of dollars in tip money and to impose civil penalties on the company.
“DoorDash misled consumers, who reasonably believed that their tips would go to workers, not the company’s bottom line,” said Attorney General Karl Racine in a statement. “We are filing suit to put a stop to this deceptive practice and secure monetary relief for those harmed by DoorDash’s actions.”
DoorDash said the accusations are without merit. The San Francisco-based delivery company changed its pay structure in August and said workers are earning more money under the new system. According to the complaint, however, the company did not provide restitution for customers who were misled or workers who had their tips taken.
The lawsuit is the latest attempt to improve working conditions in the so-called gig economy, where tech companies connect customers with freelance workers who provide meal deliveries, give rides or run errands. DoorDash recently pledged $30 million to fight a new California law that would give contractors workplace protections of full-fledged employees. Ride-hailing heavyweights Uber and Lyft are also spending millions to fight the change.
“It’s deeply troubling that Doordash committed $30 million to a California ballot measure to deny drivers basic protections while allegedly stealing those same drivers’ tips,” said Steve Smith, spokesman for the California Labor Federation, in an email.
The California Labor Federation estimates DoorDash delivery workers earn about $7 to $8 per hour after expenses, but the rate varies by location, Smith said.
Racine began investigating how DoorDash pays delivery workers after media reports surfaced about its tipping practices. The investigation examined pay practices from July 2017 to September 2019.
DoorDash encouraged consumers to tip and included a default recommended tip for all orders. But the workers were paid the same in nearly all cases, no matter how much the customer tipped, the complaint said. Instead, tips largely went to subsidize DoorDash’s payment to workers so the more customers tipped, the less DoorDash had to shell out, the complaint said.
Before accepting a delivery job, workers were offered a guaranteed amount, the complaint said. If the delivery worker was guaranteed $10 for the job and the consumer didn’t leave a tip, DoorDash would pay the worker $10. If the consumer tipped $3, DoorDash would use it to offset the $10 it owed the delivery driver, leaving the company to pay only $7. The delivery worker got the same amount regardless of the tip, the complaint said.
DoorDash worked with an independent firm to verify that it has always paid 100% of tips to delivery workers, a DoorDash spokeswoman said.
Tech companies are constantly transforming the payment models on their platforms, and it’s difficult for the public to understand how those models work, said Ben Wiseman, director of office of consumer protection for the D.C. attorney general.
“You can always tip a worker who delivers your food in cash, and that way you can be assured the worker is going to be able to get and keep that tip,” Wiseman said.