DoorDash and its tipping policies are at the center of controversy once again. This time, D.C. Attorney General Karl Racine has brought charges against the third-party restaurant delivery service, alleging that the company pocketed tips for workers and misled customers about where their tips went.
The company changed its much-maligned former tipping model earlier this year, but Racine is now seeking to recover millions of dollars in tip money DoorDash customers paid over the last couple years, calling the former model “deceptive.”
Here’s a quick recap:
Under the old tipping model, Dashers — that is, the folks driving/biking/walking DoorDash orders to customers — were guaranteed a minimum pay amount for each order they delivered. That minimum came not from an hourly wage but from a base fee paid by DoorDash then supplemented by workers’ tips. As the lawsuit alleges, “the only thing the consumer’s tip changed was DoorDash’s share of the worker’s pay. “
That lack of transparency for customers, who would have had to go through the fine print with an even finer-toothed comb to understand where their tip money was going, is a main point in the lawsuit:
“Any reasonable consumer would have expected that the ‘tip’ they added to the delivery charge through the DoorDash checkout screenflow would be provided to the Dasher on top of the payment promised by DoorDash for the delivery. But during the relevant time period, that was not the case.”
A spokesperson for DoorDash responded to the lawsuit with the following:
“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.”
The lawsuit comes at a time when the debate around the ethics of the third-party delivery model has gotten louder, particularly when it comes to how workers are treated, paid, tipped, etc. The California Senate passed Assembly Bill 5 in September, which entitles gig workers like Dashers to minimum wage, workers comp, and other labor protections. DoorDash, Uber, and Lyft responded by pledging tens of millions of dollars to fight the legislation.
Even if they succeed in overturning AB 5, these companies — and the business models to which they cling so tightly, will face more lawsuits, regulations, and legislation battles with time. And while bad press is one thing, the real danger for third-party delivery companies in all this is that legal and regulatory struggles could corrode that existing business model and undercut food delivery’s potential to be profitable (not that there is any profit at the moment).
Controversies haven’t yet gotten in the way of investment for DoorDash, which was valued at almost $13 billion in May of 2019 and recently raised another $250 million.
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