Food delivery giant DoorDash has agreed to pay $16.8 million in restitution to approximately 63,000 of its New York delivery workers after misusing customer tips to subsidize wages. The settlement, announced by New York Attorney General Letitia James, comes after an investigation into DoorDash's "guaranteed pay" model, which was found to be deceiving workers and misleading customers.

Under the model, which was in place from May 2017 to September 2019, DoorDash would "guarantee" a certain payout to workers, regardless of whether customers tipped or not. However, what the company didn't make clear was that it was using customer tips to make up the difference between the guaranteed amount and the base pay of $1. For instance, if a delivery job had a guaranteed payment of $10 and the customer tipped $6, DoorDash would pay the worker $1 plus the $6 tip, and then fill in the remaining $3 to meet the guarantee. If the customer tipped $7 or $8, the worker wouldn't receive any additional payment, and DoorDash would pocket the difference.

The practice was met with widespread criticism from workers and customers, who felt that their tips were not being used as intended. DoorDash CEO Tony Xu eventually acknowledged the issue, tweeting that the company had been "doing the right thing for Dashers by making them whole if a customer left no tip, but the feedback we've received recently made clear that some of our customers who were leaving tips felt like their tips didn't matter."

The New York Attorney General's office also found that DoorDash's disclosures about how tips worked were "buried" and difficult to access during the ordering process, leading to further confusion among customers. As part of the settlement, DoorDash will pay up to $1 million in administrative costs to facilitate the repayment process. Some workers are expected to receive several thousand dollars, while others may receive as much as $14,000.

This is not the first time DoorDash has faced scrutiny over its tipping policies. In 2020, the company agreed to pay $2.5 million to settle a similar complaint with the Washington D.C. Attorney General's office. In November, DoorDash also agreed to pay $11.3 million to settle a complaint with the Illinois Attorney General's office.

The settlement serves as a reminder of the importance of transparency in the gig economy, where workers often rely on tips to make a living wage. As the industry continues to grow, it is crucial that companies prioritize fairness and honesty in their dealings with workers and customers alike.

In related news, DoorDash and Grubhub are currently facing a lawsuit from the city of Chicago over unfair fees and tipping policies. The case is ongoing.

DoorDash's settlement with the New York Attorney General's office is a significant step towards rectifying past wrongs and ensuring that workers are fairly compensated for their labor. As the company moves forward, it will be important to prioritize transparency and fairness in its dealings with workers and customers.