DoorDash will be required to pay $2.5 million to settle a Washington, D.C. lawsuit that accused it of misleading customers by not giving full tips to drivers.
In a lawsuit filed in 2019, the Washington D.C. Attorney General’s Office alleged that the third-party delivery provider was using tips to cover the base pay of workers. According to the office, that means the more customers tipped, the less DoorDash had to pay drivers out of its own pockets. An investigation was launched in March 2019, and the case examined DoorDash’s tipping practices from July 2017 to September 2019.
DoorDash will pay $1.5 million to drivers, $750,000 to Washington, D.C., and donate $250,000 to two charities in the area.
“Today’s settlement rights a wrong that deceived D.C. consumers and deprived workers of monies that they should have been paid,” said Attorney General Karl Racine in a statement. “Gig economy companies provide important and necessary services, especially during the pandemic. However, the law applies to these companies, just as it does to their brick and mortar counterparts. All businesses in the District must provide consumers with truthful information and cannot deprive workers of monies they have earned. We are pleased that DoorDash has changed its policies, and with this settlement has taken responsibility for its actions.”
As part of the terms, the aggregator also has to keep a payment model that ensures all tips go to drivers and that none of it affects base pay. Additionally, the company must be transparent to consumers in describing how workers are paid and must reveal any changes to tipping practices or the payment model.
DoorDash, which recently filed an IPO, said in its filing that it formed a new pay model that has led to an increase in compensation for drivers. However, it acknowledged that it may also lead to less consistency in earnings.
In the court documents, DoorDash denied that it violated the Consumer Protection Procedures Act or “any other law, engaged in any deceptive practices, or committed any wrongdoing.”