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DoorDash has spent much of 2019 in hot water. As soon as consumers untangled the San Francisco-based food delivery company’s payment strategy of using tips to subsidize payments to drivers, they called for change. In August, DoorDash announced it was amending its tipping practices, but D.C. Attorney General Karl Racine is moving ahead with a lawsuit filed today. According to his office, there are tens of thousands of DoorDash drivers in the District.
The Office of the Attorney General conducted an investigation in March that examined DoorDash’s payment practices from July 2017 through September 2019. It confirmed that DoorDash used consumer tips to offset the company’s payment to workers. This is especially problematic, according to the complaint, because customers using the app had the reasonable expectation that the tips they left would go directly to their delivery drivers.
The complaint includes a description of how DoorDash’s payment system worked during the time period the OAG evaluated. After a customer placed an order, the company would present drivers with a “guaranteed amount” they would earn if they accepted the job. If a customer used the app to tack on an extra couple dollars as a tip, the driver would not necessarily make the predetermined “guaranteed amount,” plus the tip.
“During the relevant time period, DoorDash’s payment model for all orders was that it would pay $1 plus the remainder of the guaranteed amount not covered by the consumer’s tip,” the complaint states. “Take, for example, a job where DoorDash set the guaranteed amount at $10. If a consumer tipped $0, DoorDash would pay $10 ($1 + $9 remainder). If a consumer tipped $9, DoorDash would pay $1 ($1 + $0 remainder). Thus, no matter where the tip was between $0 and $9, the ‘dasher’ would be paid the same ($10). The only thing the consumer’s tip changed was DoorDash’s share of the worker’s pay. Indeed, in the overwhelming majority of circumstances, the consumer’s tip had no impact on the Dasher’s actual payment.”
By the filing the lawsuit, OAG is demonstrating that a policy change is not enough. Thousands of drivers lost out on tips. With this lawsuit, OAG says it is seeking a court order to “force DoorDash to surrender these tips, and pay civil penalties for violating the District’s consumer protection laws.” The complaint estimates that DoorDash is valued at nearly $13 billion.
The lawsuit lands at a time that delivery service options are soaring. According to Forbes, online food delivery is set to become a $200 billion industry by 2025. Some companies are more transparent about their payment practices than others. And if you’re really concerned about your driver receiving a tip, there’s always the option of cash.
A DoorDash spokesperson provided the following statement to City Paper in response to the lawsuit:
“We strongly disagree with and are disappointed by the action taken today. Transparency is of paramount importance, which is why we publicly disclosed how our previous pay model worked in communications specifically created for Dashers, consumers, and the general public starting in 2017. We’ve also worked with an independent third party to verify that we have always paid 100% of tips to Dashers. We believe the assertions made in the complaint are without merit and we look forward to responding to them through the legal process.”