DoorDash is in deep shit over in DC over the controversial wage model it had in place for years that used customer tips to pay worker wages and inflate its bottom line.
Attorney General Karl Racine announced Tuesday that following an investigation that began in March, the District of Columbia is suing DoorDash for allegedly violating the Consumer Protection Procedures Act up until September when the company began switching dashers to its current pay model (though that one’s predatory in new but equally confounding ways). The Office of the Attorney General alleges that the delivery service did so by misleading consumers about how its tip system impacted workers’ wages, as well as by using tips to cover its overhead costs.
Before finally announcing in August that it planned to overhaul its pay model, DoorDash faced months of ongoing public backlash for a system that the company put in place in 2017. Here’s how worker pay was calculated under the old pay model: DoorDash promised to pay at least $1 per dash (or delivery). Wages were made up of tips, plus DoorDash’s $1 base wage, and whatever else was needed to make up the base wage that workers were promised.
Every order came with a different guaranteed rate. So, for example, if an order paid out an $8 guaranteed rate and a customer tipped $5, DoorDash would only pay out $3 for the dasher’s base pay. Often the customer effectively wound up paying nearly all of the courier’s wages when they thought they were helping the Dasher get closer to a livable wage. In fact, the only instance in which DoorDash was required to pay all of a guaranteed base wage was in cases where a customer tipped nothing (a fact that prompted some dashers to encourage cash tips).
DoorDash has maintained that it has always allowed its workers to keep 100 percent of their tips (which is the law). But this claim is seemingly crafted to be misleading, as tips were used toward wages and drivers only kept overages that exceeded their base pay. The tip-skimming system specifically functioned to offset costs to the company.
“Over the course of the two-year relevant time period DoorDash had this policy in place, consumers in D.C. paid millions of dollars in tips that were used to subsidize DoorDash’s payments to Dashers,” the suit alleges. “Had DoorDash adequately disclosed its payment model to consumers and the fact that tip amounts would rarely have an impact on Dasher pay, this understanding would have significantly affected consumers’ tipping decisions.”
In a statement to Gizmodo by email, DoorDash said it believes “the assertions made in the complaint are without merit and we look forward to responding to them through the legal process.”
“We strongly disagree with and are disappointed by the action taken today,” the company said. “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.”
Again, however, the company here uses some labored mental gymnastics to get around the fact that it was paying out tips in a dishonest way by applying them toward a worker’s base wage, as Racine noted in a statement about the suit.
“DoorDash misled consumers, who reasonably believed that their tips would go to workers, not the company’s bottom line,” Racine said. “We are filing suit to put a stop to this deceptive practice and secure monetary relief for those harmed by DoorDash’s actions.”