In a significant development for gig economy workers, DoorDash has reached an agreement with New York's Attorney General, Letitia James, to compensate more than 60,000 delivery drivers. The settlement of $16.75 million addresses allegations that the company had been misusing tips intended for drivers between May 2017 and September 2019. This compensation aims to rectify a pay model that allegedly misled drivers about their earnings structure, diverting tip money to cover base pay instead of providing it as additional income.

The heart of the controversy lies in how DoorDash structured its payment system during this period. At the time, the platform offered drivers a guaranteed minimum wage for each delivery. However, rather than paying this amount outright and allowing drivers to keep all tips, the company incorporated tip amounts into the guaranteed wage. For instance, if a driver was promised a minimum of $10 for a delivery and received a $5 tip, DoorDash would only contribute $4 to meet the guarantee, keeping any excess over the minimum for itself. This meant that unless a customer tipped above the guaranteed amount, drivers did not benefit from the full value of the tip.

This practice was further complicated by misleading communications. According to the lawsuit, DoorDash informed customers that "Dashers will always receive 100 percent of the tip," without clearly explaining that these tips were being used to offset the company’s own payments. As a result, many customers believed their tips were going directly to drivers, unaware that they were indirectly subsidizing DoorDash's operational costs. The Attorney General's office argued that this lack of transparency left both drivers and customers in the dark about the true nature of the payment system.

Following public scrutiny and legal action, DoorDash revised its payment model to ensure that every tip increases the driver's earnings directly. Now, eligible drivers who were affected by the old policy will be contacted by a settlement administrator to receive their share of the settlement funds. This resolution marks a belated but necessary step toward fairer compensation practices in the gig economy, acknowledging the rights of workers to receive the full value of customer tips.