DoorDash has reached a settlement of $131 million with the city related to claims of underpaid tips to its delivery workers, marking the conclusion of a legal struggle between the food delivery service and City Hall.
This agreement follows a report earlier this year from the city’s Department of Consumer and Worker Protection. The report claimed that DoorDash and Uber Eats defrauded delivery workers of over $550 million due to their tipping practices.
In a statement released recently, DoorDash acknowledged their failings, saying, “Simply put, we screwed up. Our mistakes meant some Dashers were underpaid or paid late.” They emphasized that, while the issues were not intentional, they recognized the seriousness of the situation, asserting that “Dashers should be paid in full, on time, every time.” They extended their apologies to those affected.
The city’s report, which came out in January, highlighted a significant drop in average tips for DoorDash and Uber Eats workers—from $3.66 per order down to just 93 cents in the week following the implementation of new regulations. This amount declined even further to 76 cents per delivery.
New York City laws mandate that food delivery apps must allow customers the option to tip at checkout, with a standard default tip set at 10% of the order total. The two popular platforms rolled out changes to their post-checkout processes simultaneously with the city’s adjustments to pay scales for delivery personnel, which consumer protection advocates suggested led to delayed or missing payments for many workers.
This settlement puts an end to the conflict, although DoorDash pointed out that it impacts less than 1% of its delivery workforce in the city, impacting about 264,000 “Dashers” eligible for compensation.
The company noted that around $6.6 million of payments did not reach the drivers, along with another $5.7 million that was disbursed significantly later than expected. However, they stated that the average amount missing for each affected delivery worker was just $7.70, with a median payment gap of $48.
The settlement payment breakdown includes $12.3 million allocated for those who were shortchanged or received late payments. An additional $83 million will address disputes regarding payment calculations based on the time drivers spent online between deliveries, while the remaining funds will cover city fines.
“Despite our best efforts to comply with the new rules, we made mistakes,” DoorDash representatives said. They indicated that many of these errors were due to technical glitches or arose in complicated circumstances, like deliveries that extended across city lines or involved multiple stops, and also included situations where Dashers submitted incomplete or inaccurate banking information.
