Food delivery platform DoorDash has agreed to pay $16.75 million to settle a lawsuit filed by New York's Attorney General, Letitia James, alleging that the company misused customer tips to cover wages for its delivery workers.

The lawsuit, filed in 2020, accused DoorDash of using customer tips to offset the base pay it had already guaranteed to workers, instead of giving workers the full tips they received. This practice, which took place between May 2017 and September 2019, affected approximately 63,000 DoorDash delivery workers in New York.

The Attorney General's office claimed that DoorDash's actions not only shortchanged its workers but also misled customers into believing that their tips would directly benefit the delivery workers. The lawsuit sought damages for the affected workers and an injunction to stop the company's alleged deceptive practices.

In a statement to TechCrunch, DoorDash acknowledged the settlement, saying, "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." The company did not admit to any wrongdoing as part of the settlement.

The settlement is a significant win for the Attorney General's office, which has been cracking down on companies that exploit their workers. The payout will provide much-needed relief to the affected delivery workers, who were unfairly denied their rightful earnings.

The incident serves as a reminder of the importance of transparency in the gig economy, where workers often rely on tips to make a living wage. The settlement may also prompt other companies in the industry to reexamine their tipping practices and ensure that they are treating their workers fairly.

DoorDash has faced similar allegations in the past, with workers in other states accusing the company of misusing tips. While the company has made changes to its pay model since 2019, the settlement highlights the need for continued vigilance in protecting workers' rights.

The settlement is expected to have broader implications for the gig economy, as companies face increasing scrutiny over their treatment of workers. As the industry continues to evolve, it is essential that companies prioritize fairness, transparency, and equity in their dealings with workers.