DoorDash’s years-long scheme to use customer tips to subsidise its workers’ wages is finally catching up to the company. And hot on the heels of renewed outrage about its tip-shaving scheme, a new class-action lawsuit is taking aim at the company for misleading its customers about how their tips were used.
Though the controversial tipping system has been covered widely for months, the lawsuit follows a recent New York Times article in which reporter Andy Newman completed a 27-hour stint as a dasher (the term DoorDash uses for its delivery workers).
The suit, filed this week in the U.S. District Court for the Eastern District of New York on behalf of Brooklyn resident Alan Arkin and “others similarly situated,” claims that that DoorDash failed to make clear to its customers that tips they gave through its app to couriers were not being allocated as they were intended to be, and that had customers known this, they would not have tipped through the app. (It wasn’t immediately clear by press time whether the plaintiff Alan Arkin is the same award-winning, Little Miss Sunshine-starring actor of the same name, but rest assured we’ve reached out to Arkin’s lawyers to find out.)
The suit defines a member of the class as someone who has “used DoorDash and paid a tip through the Door Dash app within the statutory period.”
“DoorDash has engaged in unlawful and deceptive acts, practices and misconduct by misleading Plaintiff and the consuming public to believe that the tip amount entered on the DoorDash app would be received as a tip by the DoorDash delivery workers for their service,” the filing states. “DoorDash knew, and failed to disclose, that the tip amount entered by Plaintiff and other consumers on the app was received by DoorDash, in whole or in part, and used to subsidise its cost of doing business.”
Through a system introduced in 2017, DoorDash can pay as little as $US1 ($1) per delivery to a worker depending on the amount that a customer tips on the order. This system promises a guaranteed earning, for example, $US8 ($12), that the dasher will make on a delivery.
If a customer does not tip, DoorDash will pay out $US1 ($1) plus the remaining $US7 ($10) it takes to make up that promised wage. However, if a customer does tip, their money will be used to subsidise the worker’s guaranteed pay. In other words, customers are essentially paying DoorDash—not the delivery worker—with their tip.
The lawsuit comes at a tumultuous moment for the company. Faced with renewed outrage at the system following the Times article, the company’s CEO Tony Xu announced last week that the company would be overhauling its pay model, adding that “the new model will ensure that Dashers’ earnings will increase by the exact amount a customer tips on every order. We’ll have specific details in the coming days.”
DoorDash’s tipping policy has — until recently — largely confused the public and workers alike because it claims that its delivery workers get to keep “100 per cent of customer tips” without explaining that the tips are used to subsidise its delivery drivers’ base pay. It’s also misleading for customers, who believe they’re providing additional money to a courier for their services.
The lawsuit claims that these “unfair and deceptive acts were knowing, willful and/or reckless.” Cory Zajdel, one of three attorneys representing the plaintiffs in the suit, told Gizmodo in a statement by email that they’re seeking reimbursement for tips customers assumed were being given as additional earnings to dashers.
“DoorDash financed its growth by taking tips paid by its users and meant for hard-working delivery workers. Mr. Arkin and all other class members that used DoorDash should recover, at a minimum, all tips that were never paid to the delivery workers,” Zajdel said.
The suit is seeking a trial by jury. DoorDash did not immediately return a request for comment.