DoorDash’s ‘deceptive’ tipping policy fuels DC lawsuit

New York Post Finance 3 weeks ago

Washington DC’s attorney general sued DoorDash this week over tipping practices he ripped as “deceptive.”

“DoorDash misled consumers, who reasonably believed that their tips would go to workers, not the company’s bottom line,” Democratic Attorney General Karl Racine said in a statement about the suit, filed Tuesday.

Racine wants the food delivery platform to fork over tips it pocketed instead of passing them along directly to workers as gratuities.

“We are filing suit to put a stop to this deceptive practice and secure monetary relief for those harmed by DoorDash’s actions,” he said. 

The complaint in DC’s Superior Court marks the latest government salvo against the exploding food delivery industry. Companies such as Grubhub and Uber Eats have also drawn scrutiny for the financial burdens they impose on restaurants.

DoorDash said it was “disappointed” by Racine’s lawsuit and dismissed the attorney general’s claims.

“We believe the assertions made in the complaint are without merit and we look forward to responding to them through the legal process,” a DoorDash spokesperson said in a statement.

For about two years, DoorDash used millions of dollars that DC diners paid in tips to cover its payments to its delivery workers known as “Dashers,” Racine’s office said. The company led customers to believe their tips would boost the workers’ earnings when in reality they only allowed DoorDash to pay a lower share of their wages, according to the office.

DoorDash announced in August that workers would receive “every dollar” of customer tips as extra earnings, along with other changes to its payment model. US workers’ overall earnings have since risen to $18.54 per active hour in October from an average of $17.24 in August, the company said last week.

But DoorDash has not paid back any tips DC consumers paid under the old policy, Racine’s office said. His lawsuit calls for civil penalties as well as the surrender of those tips.

“Had DoorDash adequately disclosed its payment model to consumers and the fact that tip amounts would rarely have an impact on Dasher pay, this understanding would have significantly affected consumers’ tipping decisions,” the complaint reads.

DoorDash said it disclosed details about its old payment model in communications to workers, customers and the general public. The firm has also worked with an “independent third party” to make sure all tips were paid to workers, the company said.

Racine’s lawsuit came as the New York City Council considers a legislative crackdown on Silicon Valley’s food delivery players. City lawmakers are targeting the commission rates the firms charge restaurants for each transaction, which restaurant owners say can be as large as 30 percent of a single order, The Post reported this week.

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