DoorDash will pay $131 million to settle allegations that it underpaid delivery workers in New York City, bringing an end to a legal dispute with City Hall over the company’s handling of tips.
The settlement follows a report released earlier this year by the city’s Department of Consumer and Worker Protection. That investigation accused DoorDash and Uber Eats of shortchanging delivery workers by more than $550 million through their tipping practices.
DoorDash acknowledged the failures in a statement this week, saying, “Simply put, we screwed up.” The company said its errors caused some Dashers to receive less money than they were owed or to receive their payments late.
“While these mistakes weren’t intentional, that doesn’t make them okay,” DoorDash said. “We pride ourselves on operational excellence at DoorDash – and this was not excellent, nor was it acceptable. Dashers should be paid in full, on time, every time. We are sorry to the Dashers we let down.”
The city’s January report found that average tips for DoorDash and Uber Eats couriers fell sharply after new rules took effect. Average tips dropped from $3.66 per order to 93 cents during the first week, then declined further to 76 cents per delivery.
New York City law requires food delivery platforms to give customers the option to tip drivers during checkout. The apps must also present a default tip of 10% of the order total.
DoorDash and Uber Eats, two of the world’s biggest food delivery services, rolled out post-checkout tipping systems as the city implemented inflation-linked pay increases for delivery workers. Consumer protection officials said the changes resulted in some workers receiving their pay late or not receiving it at all.
Although the settlement closes the case, DoorDash said the issue affected fewer than 1% of its delivery workers in the five boroughs. Even so, roughly 264,000 Dashers are expected to receive payments.
DoorDash said approximately $6.6 million that should have gone to drivers was never delivered, while an additional $5.7 million reached workers days or weeks behind schedule. The company said the average missing payment was $7.70, while the median was $48.
Under the agreement, $12.3 million will go to Dashers who were underpaid or paid late. Another $83 million will settle a dispute over how compensation should be calculated for time workers spend logged into the app between deliveries. The remaining funds will cover penalties owed to the city, DoorDash said.
“Despite our best efforts to comply with the new rules, we made mistakes,” DoorDash officials said. The company attributed many of the problems to software bugs and complicated delivery circumstances, including trips that crossed city lines, involved several pickup or drop-off points, or were partially completed or cancelled.
DoorDash added that some payment problems occurred because Dashers submitted banking information that was incomplete or inaccurate.
