Food-delivery startup DoorDash came under fire earlier this year for using customer tips to subsidize driver pay. DoorDash promises workers, which it calls Dashers, a “guaranteed minimum” payment on each order. It counts customer tips toward that minimum, rather than on top of it.
Here’s how DoorDash explains this on its help page:
DoorDash pays more than $1 per delivery when the customer doesn’t leave a big enough tip to meet the guaranteed minimum it sets. If that minimum is $10 and you tip $5, then DoorDash kicks in the $1 base plus an additional $4. If the minimum is $10 and you tip $9, then DoorDash pays only the $1 base. If the minimum is $10 and you tip nothing, DoorDash pays the $1 base plus an additional $9.
In any of these cases, the outcome for the worker is the same: They get $10. So long as your tip counts toward the guaranteed order minimum set by the company, it doesn’t matter to the worker whether you left it or not; they get paid the same. Tips also don’t affect Dasher ratings. But it matters to DoorDash, because if you don’t leave a tip, the company has to cover the entire cost of the guaranteed minimum it promises to drivers to take on a job.
Tips are one way in which DoorDash obscures the true cost of its service. As a customer, you pay service and delivery fees, but you are also asked to leave a tip through the app. DoorDash can see how much customers tip via the app, and adjusts its contribution towards the promised payment to drivers accordingly. Your tips bear part of the direct labor cost so that DoorDash, a company that has raised $2 billion in funding and is valued at $12.6 billion, doesn’t have to.
Here’s a better option: Tip in cash.
Let’s revisit that hypothetical order with the $10 guarantee. If you leave zero tip in the app, but you give your delivery worker $5 in cash, then guess what? DoorDash pays them the $1 base plus $9 to meet the minimum, and they also get your $5 tip, for a total of $15. When you leave the same $5 tip in the app, DoorDash counts it against the order guarantee and the worker only gets $10. The cost to you in both cases is $5, but when you tip in cash the worker gets that money on top of the order minimum, rather than as part of it.
“I think we’d say that any amount of money that goes in the Dasher’s pockets is a good thing,” DoorDash head of policy Max Rettig said in an interview with Quartz. “So if folks want to tip in cash to Dashers, that’s great.”
DoorDash’s model is essentially a tipped minimum wage. In most but not all states, employers can pay tipped employees like waiters and bartenders less than the prevailing minimum wage so long as they earn enough tips per hour to make up the difference. The reality of how tipping works is often at odds with the popular conception among consumers that a good tip ought to be earned by the worker—that is, something extra on top of their core duties. It’s one of many reasons why tipping is an abysmal practice.
Federal law requires employers to pay tipped-minimum-wage workers at least $2.13 per hour, plus more if they don’t earn enough in tips to meet the prevailing minimum wage. Many states require the employer to pay more than $2.13, and limit the amount of tips (called a tip credit) they can put toward meeting the combined minimum. Arizona, for instance, requires employers to pay a minimum cash wage of $8 an hour and limits the tip credit against the minimum wage to $3, for a combined rate of $11 an hour.
Because DoorDash workers are independent contractors, not employees, they aren’t protected by federal, state, or local labor laws. If DoorDash workers were considered employees, as could happen under a bill being considered in California, then it would be a different story. In California specifically, DoorDash would have to pay couriers the full state minimum wage of $12 an hour out of its own coffers. Any customer tips would be extra on top of that, as they should be.
Rettig told Quartz that DoorDash pays only the base $1 in “a small minority of cases” (he declined to put a number on it). He said the company sometimes does promotions—for example, on a busy Friday night—in which Dashers can earn bonus pay on top of the guaranteed minimum for taking orders. “Where there is no incentive, and if it’s not a large catering order, and if the customer leaves a large enough tip that it meets the guarantee, then DoorDash’s contribution would only be $1,” he said.
Becky Sosnov, a DoorDash spokesperson, told Quartz the company “contributes more than the customer does” to Dasher pay on roughly 60% of orders, and that customers leave no tip on about 15% of orders. Dashers see the guaranteed minimum for an order before they accept it, Sosnov said, but don’t see the tip a customer has left until after the delivery is completed.
In a lengthy blog post on June 27, DoorDash CEO Tony Xu defended the company’s tipping practices. DoorDash, he wrote, held worker roundtables about its pay policies and conducted online surveys. (“These were really intensive listening exercises,” Rettig said.) Xu said the company’s pay model “means that Dashers are more likely to accept all kinds of deliveries because they know what their earnings will be even if the customer provides little or no tip.” He said DoorDash had made occupational accident insurance available to all US Dashers while on delivery, at no cost to workers.
DoorDash competitor Postmates recently agreed to an $85,000 settlement over alleged tipping violations. If you want to be sure your tip is extra money on top of what the worker already expects to be paid, don’t do it in the app. Leave it in cash.
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