DoorDash is being sued by DC Attorney General Karl Racine over allegedly deceiving customers with a controversial tipping policy.
The complaint is drawing renewed attention to a since-changed DoorDash policy where a customer’s tip could be put toward covering the base pay for that customer’s delivery person instead of as an above-and-beyond payment as tips are typically intended.
According to the complaint, the practice was in place from July 2017 until at least September 2019, during which customers in DC alone paid “millions of dollars in tips that were used to subsidize DoorDash’s payments to Dashers,” as the company refers to its delivery people. The lawsuit seeks to recover that money and impose civil penalties.
“This practice was deceptive, as any reasonable consumer would have expected that the amount they chose to tip would increase a worker’s pay and be provided to workers on top of DoorDash’s promised payment,” the complaint, released by the Office of the Attorney General, alleges.
The Office of the Attorney General opened an investigation of DoorDash’s tipping practices in March 2019, according to the complaint. After mounting backlash to its policy, DoorDash announced changes to how workers would be compensated in late August.
In a statement, a DoorDash spokesperson said, “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,” the company said. “We believe the assertions made in the complaint are without merit and we look forward to responding to them through the legal process.”
At the time of the policy change, CEO Tony Xu said, “we initially resisted change even in the face of public pressure because we built our model in direct response to feedback from Dashers.” The company said it would increase a minimum base pay for delivery workers from $1 to $2, with the potential to be as much as $10, depending on the estimated “duration, distance, and desirability” of a delivery job. The company also said all tips will be added on top of that base pay.
Last week, DoorDash released an analysis of the new pay model, but a workers’ rights group, for one, wasn’t satisfied with it.
The analysis, conducted by economic research and consulting firm Beacon Economics for DoorDash, found that the average earnings for DoorDash workers were $18.54 an hour in October, after the new pay model rolled out, up from $17.24 in August, the last month of the old model. It also said that the amount DoorDash contributed to workers’ pay went up 12.5% on average during the time frame, but it did not break that amount out, or disclose how much customer tips contribute to overall earnings for workers.
Max Rettig, DoorDash’s senior counsel and head of policy, told CNN Business last week that the company released the average earnings stat (which incorporates tips and doesn’t account for worker expenses) because it is “the number we’ve always publicly reported.”
In response to the analysis, Seattle-based workers’ rights organization Working Washington — which called out DoorDash’s tipping policy in February — alleged that the analysis fell short of being transparent and came out with one of its own. Using DoorDash’s average hourly pay, the organization said, workers earn about $7.17 per hour after expenses, up from $6.29 per hour before the change.