DoorDash is facing financial consequences over its past payment practices. The food delivery giant has agreed to a $16.75 million settlement following allegations that, for years, it misled customers and underpaid its delivery drivers by using customer tips to supplement base wages.
The New York Attorney General’s Office (OAG) conducted an investigation revealing that, between May 2017 and September 2019, DoorDash operated under a pay structure that effectively redirected tips to cover guaranteed driver pay rather than giving them to workers in full.
The settlement also includes an additional $1 million to cover administrative costs related to distributing payments to eligible Dashers.
How DoorDash’s Former Pay Model Worked
DoorDash’s tipping system during this period was far less transparent than advertised. The company promised that Dashers would receive 100% of customer tips—but the reality was much more complicated.
Under the old system:
Dashers were given a guaranteed minimum payout per order (e.g., $10).
If a customer tipped less than that amount, DoorDash would use the tip to meet the guaranteed pay instead of adding it on top. Only when a tip exceeded the guaranteed minimum did Dashers see any additional earnings.
For example:
If a Dasher was guaranteed $10 and a customer tipped $8, DoorDash would contribute only $2 to meet the base pay—leaving the worker with the same $10 total earnings.
If a customer tipped $12, DoorDash would still only pay $1, meaning the worker earned $13 total ($12 tip + $1 from DoorDash).
The problem? Customers had no idea this was happening. The company failed to disclose that tips were being used to offset costs rather than going directly to Dashers.
According to New York Attorney General Letitia James, this system was deceptive:
“Customers had no way of knowing that DoorDash was using tips to reduce its own costs.”
DoorDash Responds: “We No Longer Use This Model”
In response to the settlement, DoorDash maintains that its current payment system is fully transparent and that the pay structure in question was discontinued in 2019.
A spokesperson for the company told TODAY.com:
“We remain committed to making sure that Dasher earnings are always fair and transparent. The allegations settled were related to an old pay model that was retired in 2019. To be clear: Dashers always keep 100% of tips from orders on the DoorDash app.”
While the company denies any wrongdoing, it has agreed to the settlement and claims it has since implemented significant changes to improve clarity and fairness in how Dashers are paid.
Who Will Receive Compensation?
Approximately 63,000 delivery workers in New York who worked for DoorDash between May 2017 and September 2019 are eligible to receive a payout from the settlement.
Eligible Dashers will be contacted via mail, email, or text. A settlement website will be launched with claim instructions. Payments are expected to be distributed in early 2025.
What’s Next for DoorDash?
In addition to financial penalties, DoorDash must improve transparency regarding how it pays its workers. The settlement agreement requires the company to:
-Clearly explain pay structures to Dashers.
-Provide better earnings breakdowns so Dashers can track pay history.
-Improve disclosures for customers to ensure they understand how tips impact worker pay.
While this settlement closes one chapter, some labor experts believe the broader issue of gig worker pay remains unresolved.
An Unbiased Perspective: The Bigger Picture
This case highlights the ongoing struggles faced by gig workers in the modern app-based economy.
On one hand, the settlement is a win for workers who weren’t fully compensated for their efforts. DoorDash’s lack of transparency contributed to widespread confusion and potential financial losses for thousands of drivers. The $17M payout serves as a reminder that gig platforms must be held accountable for fair compensation practices.
On the other hand, some argue that without legislative action, issues like this will continue. Gig companies frequently change their pay structures and use opaque algorithms to determine wages, making it difficult for workers to understand their true earnings.
While DoorDash has since improved its tipping policies, the case raises an important question: How many other pay models in the gig economy still rely on hidden practices that reduce worker earnings?
For now, Dashers in New York will soon see their compensation—but the fight for fair gig worker wages is far from over.
