Wiseman said the D.C. attorney general’s office is the first in the country to sue DoorDash over its former tipping practices. The office would like to recoup the millions paid in tips and return the money to workers, who are often low-wage earners with two or more jobs. The office is also seeking civil penalties and damages.
The attorney general’s office examined the company’s practices from July 2017 to September 2019. During this period, “consumers in D.C. paid millions of dollars in tips that were used to subsidize DoorDash’s payments to Dashers,” according to the lawsuit, filed Tuesday in D.C. Superior Court. “Dashers” is the company’s term to describe its delivery workers, who are independent contractors in America’s growing gig economy.
In a statement provided by DoorDash spokeswoman Becky Sosnov, the company said it strongly disagreed with the lawsuit and is “disappointed by the action taken today. Transparency is of paramount importance, which is why we publicly disclosed how our previous pay model worked in communications specifically created for Dashers, consumers, and the general public starting in 2017. We’ve also worked with an independent third party to verify that we have always paid 100 percent of tips to Dashers. We believe the assertions made in the complaint are without merit and we look forward to responding to them through the legal process.”
According to the attorney general’s office, however, investigators found that it was difficult for consumers to find information on DoorDash’s old pay model. If you clicked on an information button during the check-out process, Wiseman said, it would provide no details about how tips were used. The only information on the pay model was found on an FAQ page, Wiseman said, which was “several clicks away, in a place that a consumer was unlikely to actually read.”
The FAQ’s description of the pay model, according to the lawsuit, was “ambiguous, confusing and misleading. Among other things, the FAQ page encouraged consumers to tip, but did not disclose that a consumer’s tip would, in the vast majority of circumstances, make no difference at all to a Dasher’s pay.”
DoorDash’s practices had received media coverage even before the attorney general’s office got involved, via reports by Fast Company and others. A New York Times report in July laid out the details of DoorDash’s pay model, as reporter Andy Newman temporarily became one more worker in the gig economy. “DoorDash offers a guaranteed minimum for each job,” Newman wrote. “For my first order, the guarantee was $6.85 and the customer, a woman in Boerum Hill who answered the door in a colorful bathrobe, tipped $3 via the app. But I still received only $6.85.”
It has been a tough fall for DoorDash. In September, the company reported a data breach in which the personal information of 4.9 million customers, workers and merchants was compromised through an unnamed third-party service provider.
The District’s lawsuit comes just days after DoorDash received $100 million in new funding, according to a recent Bloomberg report. To date, the same story noted, DoorDash has raised roughly $2 billion in funds. The company is currently valued at $12.6 billion.
DoorDash noted that, as of Oct. 1, all Dashers have been moved to the new pay model. Earlier this month, the company posted a brief report on how the revamped model has improved pay for Dashers, comparing their earnings in August vs. those in October. Earnings “increased from an average of $17.24 per active hour in August to $18.54 per active hour in October,” the report explained. The numbers were validated, DoorDash’s Sosnov said, by the independent consulting firm, Beacon Economics.
“When rolling out this model, we shared that customers would be able to tip before or after their delivery based on their preference,” the report added. “We’ve since enabled this feature for 100 percent of orders. When a customer leaves a tip after the delivery is completed, the Dasher will receive a push notification to alert him or her of the increased earnings.”