WASHINGTON (AP/CBS SF) — The attorney general of Washington D.C. is suing DoorDash, saying the San Francisco-based food delivery service pocketed tips that customers thought were going to delivery workers.
The lawsuit, filed Tuesday, seeks to recover millions of dollars in tip money and to impose civil penalties on the company.
“DoorDash misled consumers, who reasonably believed that their tips would go to workers, not the company’s bottom line,” said Attorney General Karl Racine in a statement. “We are filing suit to put a stop to this deceptive practice and secure monetary relief for those harmed by DoorDash’s actions.”
DoorDash said the accusations are without merit. The delivery company changed its pay structure in August and said workers are earning more money under the new system. It worked with an independent third party to verify that all tips are paid to its delivery workers, a DoorDash spokeswoman said. The company insists that under the new pay model, so-called “Dashers” are earning more.
“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,” said DoorDash in a statement.
According to analysis from Beacon Economics, October earnings for U.S. Dashers increased by 12.5% in October, compared to August. Overall Dasher earnings, including tips went “from an average of $17.24 per active hour in August to $18.54 per active hour in October,” according to a company statement.
Tuesday’s lawsuit is the latest attempt to improve working conditions in the so-called gig economy, where tech companies connect customers with freelance workers who provide meal deliveries, give rides or run errands. DoorDash recently pledged to spend $30 million to fight a new California law that aims to give contractors workplace protections of full-fledged employees. Ride-hailing heavyweights Uber and Lyft are also spending millions to fight the change.
Racine began investigating how DoorDash pays delivery workers after media reports surfaced about its tipping practices. The investigation examined pay practices from July 2017 to September 2019.
DoorDash encouraged consumers to tip and included a default recommended tip for all orders. But the workers were paid the same in nearly all cases, no matter how much the customer tipped, the complaint said. Instead, tips largely went to subsidize DoorDash’s payment to workers so the more customers tipped, the less DoorDash had to shell out, the complaint said.
Tech companies are constantly transforming the payment models on their platforms, and it’s difficult for the public to understand how those models work, said Ben Wiseman, director of office of consumer protection for the D.C. attorney general.
“You can always tip a worker who delivers your food in cash, and that way you can be assured the worker is going to be able to get and keep that tip,” Wiseman said.
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