The administration of Mamdani stated on Tuesday that DoorDash and Uber Eats have allegedly hindered delivery workers from earning over $550 million in tips by enforcing a policy that requires customers to tip only after they complete their order.
The New York City Department of Consumer and Worker Protection (DCWP) projected that food delivery services may be missing out on $5,800 in tips annually for each employee because of this new tipping system, which was launched in December 2023 alongside a raise in the minimum wage for employees in New York City, as highlighted in a recent report.
Following the implementation of this tipping system, the typical tip for drivers from Uber Eats and DoorDash reportedly dropped drastically—from $3.66 to just 93 cents per delivery, and it has now further decreased to around 76 cents, according to DCWP.
A comparison showed that drivers on competing platforms, like GrubHub, which permit tips before checkout, received an average tip of $2.17.
DCWP Chairman Samuel Levin expressed concerns on Tuesday, stating that the report indicates disturbing trends where Uber and DoorDash are potentially reducing workers’ wages.
John Houghton, who leads public policy for DoorDash in North America, labeled the report’s assertions as “completely false.” Uber Eats did not respond to comments from the source.
Interestingly, both major delivery firms introduced their after-checkout tipping systems on the same day that New York City announced a raise in pay adjustments for app-based delivery workers, which currently stands at $21.44 per hour.
Since early December 2023, the stock prices of DoorDash and Uber have risen significantly, about 125% and 50%, respectively.
The two companies are currently embroiled in legal proceedings against New York City regarding the new law, which is expected to start on January 26. This law requires apps to allow customers options for tipping at checkout, with a minimum default of 10% of the total order value.
Uber Eats and DoorDash are requesting the Southern District of New York to halt the implementation of this bill, claiming it infringes on free speech rights by compelling individuals to communicate mandated government messages in a prescribed manner.
New York City contests this argument, and earlier this month, DCWP filed documents aimed at maintaining the enforcement of the new law.
A federal judge has yet to make a decision regarding the claims made by Uber Eats and DoorDash. A hearing for this case is set for Wednesday.
In their lawsuit, these companies argue that the new wage mandates have increased delivery costs in New York City, suggesting that the combination of these wage changes, “fall fatigue,” and overall price hikes will adversely affect profitability.
They also likened stringent tipping conditions to a consumer tax, remarking that, “In the current affordability crisis, the New York City Council effectively turned tipping into an additional tax by obligating platforms like DoorDash to ask consumers for tips at checkout.”
In response, City Councilman Sean Abreu, a Democrat from Manhattan who is at the forefront of this new tipping law, asserted that if someone wishes to give a tip, it should be easy for them to do so.
He emphasized that no one is compelled to tip, and making it more challenging to do so is fundamentally incorrect. “When corporations assert that delivery workers are overpaid or claim their apps’ earnings are too low, we recognize that they are not being truthful.”
A survey conducted by the Ministry in 2022 indicated that worker wages represent only one aspect of the overall costs for apps and consumers. It noted, although not as a recommendation, that apps might consider adjusting costs for consumers via changes to the user interface that diminish or remove tipping.
“Altering your tip after checkout is quite standard and not inherently problematic. It’s simply part of how tipping functions in various scenarios,” Houghton remarked.
