DoorDash’s $16.75M Payout: A Warning on Tips & Transparency

DoorDash has agreed to pay $16.75 million to settle a dispute involving its practices on handling delivery workers’ tips, New York Attorney General Letitia James announced in a press release.

Here’s what happened, according to an investigation by the Office of the Attorney General (OAG).

Tips Paid Through App Not Given to Delivery Workers

Between May 2017 and September 2019, DoorDash used a “guaranteed pay” model that was supposed to let delivery workers see how much they’d be paid before accepting a delivery.

The OAG investigation found that DoorDash used customer tips collected through its app to offset the base pay it had already promised to delivery workers, rather than giving them the full amount of the tips. 

Additionally, the investigation deemed the pay model “deceptive” because delivery workers could only see their tips if they exceeded the guaranteed base pay for the order. 

For example, if a customer tipped $6 for an order with a guaranteed payment of $10, DoorDash applied that $6 tip to the guaranteed payment of $10, which meant the company only paid out $4. That meant the delivery worker received only $10 total instead of the $16 they should’ve earned ($10 in guaranteed money from DoorDash plus the customer’s $6 tip).

OAG: DoorDash ‘Deceived’ Workers and Customers

DoorDash also failed to disclose this practice to both customers and delivery workers. 

At checkout, customers were encouraged to tip with a message stating the delivery workers “will always receive 100 percent of the tip,” the OAG noted.

However, the details about how tips were actually used were buried in online documents and unavailable during key moments in the ordering process. As a result, customers had no way of knowing their tips were being used to offset DoorDash’s costs, the OAG determined.

“Delivery workers are integral to our communities, working tirelessly to bring food and other essentials directly to our doorsteps in all conditions,” AG James said in a statement. “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. My office will continue to protect New York workers from deceptive business practices and ensure they receive all of the money they’ve earned.”

Company Must Pay Restitution, Provide Additional Relief

DoorDash agreed to pay $16.75 million in restitution, which will benefit approximately 63,000 delivery workers. Under the settlement agreement, DoorDash must also provide the following additional relief. 

• Revise pay practices. DoorDash is required to maintain a pay model that ensures consumer tips are paid to delivery workers in their entirety without impacting DoorDash’s contribution to guaranteed pay.
• Enhance transparency. The company must clearly disclose pay policy details to both delivery workers and consumers.  It must also improve pay transparency for delivery workers by sharing a breakdown of base pay, promotional bonuses and tips for every delivery.
• Improve access to work history. Delivery workers, including those deactivated, must have access to their delivery history for at least four years.

Key Lessons for Finance Professionals

The DoorDash settlement highlights important financial risks and best practices:

1. Clear Communication Prevents Risk

Hidden pay practices led to regulatory action. Finance professionals should ensure all pay policies are clearly disclosed to workers and customers.

2. Compliance Must Be a Priority

Wage and hour laws are evolving. Staying updated and ensuring payroll policies align with regulations can prevent costly lawsuits and expensive penalties.

3. Payroll Transparency Builds Trust

DoorDash now must provide workers with a clear pay breakdown. Finance teams should ensure employees have access to detailed records about their pay.

4. Ethical Pay Practices Protect the Business

Unfair compensation models can damage a company’s reputation and bottom line. Fair and transparent pay policies reduce risk and build long-term stability.