DoorDash is set to pay a $16.75 million settlement to resolve a probe led by New York officials into the delivery platform's tipping practices.
The settlement will be split among some 60,000 delivery workers — known as "Dashers" — and will range from $10 to $14,000 per worker, Attorney General Letitia James said Monday.
For years, DoorDash used tips to offset what it paid its Dashers, James told reporters in announcing the settlement.
In an example provided by James, if Dashers were offered a guaranteed amount of $10 for a delivery, and the customer didn't tip, DoorDash would pay the Dasher the promised $10.
But if the customer tipped $3, then DoorDash would let the Dasher keep that tip and pay only $7 out of its own corporate coffers.
The practice was kept secret from customers and DoorDash delivery workers, James said. Dashers didn't know that their tips weren't adding to their income, and customers had no idea their tips weren't subsidizing their Dashers' incomes and were instead helping the company save money, she said.
New York, which also worked with Illinois and DC on the probe, gained access to communications among DoorDash executives who worried that their Dashers would "figure out" what was going on, James told reporters.
"DoorDash executives knew how deceptive this policy was," she said. "They knew it wasn't right, but they did it anyway."
Under the settlement, the New York AG's office is setting up a website for Dashers to use to claim their money. DoorDash will be required to end the tip-sharing practice and lack of transparency in how tips are handled, and for the next three years, it must report to the AG's office every six months on compliance.
A DoorDash spokesperson told Business Insider the "pay model" cited by the AG's office was in place between 2017 and 2019 and hadn't been used in the past six years.
"We remain committed to making sure that Dasher earnings are always fair and transparent, and 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," a spokesperson said.
This story was updated to include comment from DoorDash.
