Bay Area restaurant-delivery firm DoorDash has agreed to pay $2.5 million to settle a government lawsuit alleging it stole drivers’ tips and deceived customers into thinking their tip money was going to drivers.
Washington, D.C. attorney general Karl Racine filed the civil suit last year, and in a news release accused the San Francisco company of “lowering labor costs by swiping tips left for workers.”
Racine claimed “DoorDash led consumers to believe that any tips would go directly to food delivery workers, while instead effectively treating this money as extra profit for the company.”
The suit in District of Columbia Superior Court alleged DoorDash would reduce drivers’ pay for each job by the amount of any tip. For example, if a customer left no tip on a job that was to pay $10 to the driver — called a “Dasher” by the company — DoorDash would pay the driver $10, but if a customer tipped $9, DoorDash would pay $1, the suit claimed. “The only thing the consumer’s tip changed was DoorDash’s share of the worker’s pay,” the suit alleged.
The San Francisco company, in the settlement order released Tuesday, denied the allegations. In an emailed statement Wednesday, the company said it was pleased to have the issue resolved. “Our focus is on continuing to support Dashers, restaurants, and customers in D.C. and around the country,” DoorDash said. The company added that the allegations concerned its former pay model, which it abandoned in September 2019, replacing it with a new model giving drivers 100% of tips.
DoorDash spent $48 million in the successful $200 million campaign by “gig economy” companies including Uber, Lyft, Instacart and Postmates to pass Proposition 22 this year and overturn state law mandating that their drivers be treated as employees entitled to minimum wage and benefits.
Under the Washington, D.C. settlement, DoorDash is to pay $1.5 million to D.C. drivers, make $250,000 in donations to two D.C. charities, and pay the D.C. government $750,000.
The company also agreed to give consumers’ entire tips to drivers, with tips having no effect on driver pay, and to provide consumers with a summary of charges for each order, including item costs, tips paid, service fees, and taxes.
DoorDash, valued at $16 billion in June, issued a filing this month to go public.
Instacart, which offers grocery pickup-and-delivery service, in 2017 agreed to settle a class-action lawsuit by shopper/drivers over alleged improprieties with tips, expense reimbursement, and a service fee said to look like a tip. The company admitted no wrongdoing.