Shares in food delivery platform DoorDash (DASH) continued to sour today after it took a near $17 million hit for taking tips away from its delivery staff.
New York Attorney General Letitia James announced the $16.8 million pay settlement yesterday after it was revealed that DoorDash used customer tips to bulk up the wages of its delivery drivers in New York State instead of allowing them to keep the tips on top of their guaranteed salary.
The money will be distributed to around 63,000 workers who made deliveries between May 2017 and September 2019. DoorDash must now maintain a pay model that ensures tips are paid to “Dashers” in their entirety without impacting guaranteed pay. The company must also disclose pay policy details to workers and customers.
Tips Were Used to Reduce Costs
DoorDash stock was down 2% at the close of trading last night and off a further 0.5% in early trading. “This is just fundamentally unfair,” James said, as reported by Fox Business. “Customers had no reason to believe that these tips were being used by DoorDash to reduce its costs.”
Under the DoorDash model it is understood that delivery workers only received the tips they got from customers if they were more than the amount the company had guaranteed to pay them for the order. DoorDash would then pay a minimum of $1 to the delivery “Dasher” and would use customer tips to offset the rest of the guaranteed amount.
Gig Economy Concerns Continue
DoorDash said the pay model was no longer in use. But it once again raises concerns over the gig economy and how delivery workers for food groups, takeaway chains and car ride services are paid and treated by their employers.
According to a new report tips are a vital source of income for delivery workers. Data analytics company Gridwise has discovered that food delivery drivers made 53.4% of their total earnings from tips on average last year. Consider that next time your favorite Sweet and Sour Pork arrives and your only thought as the aroma fills the air is to gently push the delivery person off the porch.
Is DASH a Good Stock to Buy Now?
On TipRanks, DASH has a Strong Buy consensus based on 23 Buy and 7 Hold ratings. Its highest price target is $245. DASH stock’s consensus price target is $224.33 implying an 15.35% upside.
