DoorDash has agreed to pay $16.75 million to settle allegations by New York State Attorney General Letitia James that the company engaged in deceptive pay practices from 2017 to 2019.
The settlement, announced in a statement from James’ office, could result in payments to more than 63,000 affected workers.
Allegations of Tip Misuse
The lawsuit centered on DoorDash’s prior pay model, which guaranteed workers a minimum payout per order but allegedly used customer tips to offset that amount.
According to the Attorney General’s investigation, if a worker was guaranteed $10 for an order but received a $9 tip, DoorDash would contribute only $1 in base pay. As a result, a worker who received no tip would earn the same as one who received a $9 tip, effectively reducing the financial benefit of tips intended for workers.
“When you steal and lie at this scale, it’s systemic, it’s baked into your business model. And a business model that requires you to steal from workers and customers is a failure,” said Ligia Guallpa, executive director of the Worker’s Justice Project and co-founder of Los Deliveristas Unidos.
Settlement Terms and Compliance Measures
As part of the settlement, DoorDash will ensure that 100% of consumer tips go directly to workers and that tips will not be used to offset the company’s labor costs.
Additionally, the company will be required to clearly disclose its pay structure to both workers and consumers.
“DoorDash misled customers who generously tipped and deceived Dashers who deserved to be paid in full,” James said. “This settlement returns millions to the pockets of hardworking Dashers and ensures transparency in DoorDash’s payment practices going forward.”
While DoorDash agreed to the monetary settlement, court records indicate that the company did not admit to any violations of law or wrongdoing.
A company spokesperson stated that the disputed pay model has not been in use since 2019 and maintained that DoorDash had accurately represented worker compensation during that period.
“We believe that our practices properly represented how Dashers were paid during this period, we are pleased to have resolved this years-old matter,” the spokesperson said in an email statement.
Broader Implications for the Gig Economy
This settlement follows a growing trend of legal scrutiny against gig economy pay practices. James has secured other major settlements in recent years, including a $4 million agreement with alcohol delivery service Drizly over tipping practices and a landmark $328 million settlement in 2023 with Uber and Lyft over back pay for rideshare drivers.
In addition to state-level enforcement, New York City has been a leader in delivery worker regulations, implementing a minimum hourly wage of $17.96 for app-based delivery workers in 2023.
That measure significantly increased base pay for workers, despite a slight decline in worker numbers and average tip amounts.
Legal and Industry Impact
The DoorDash settlement in New York closely mirrors an $11.3 million settlement the company reached in Illinois in November 2024 over similar pay model allegations.
Legal experts suggest that these settlements may pressure other gig economy platforms to reassess their tipping and pay transparency policies to avoid regulatory scrutiny and potential litigation.
As regulatory actions and worker advocacy groups continue to challenge gig economy labor practices, companies operating in this sector may face increasing compliance demands to ensure fair compensation for independent contractors.
