The unfair labor practices of tech-based gig economy companies have been well documented over the past few years: low pay, instability, and virtually no protection for workers, who aren’t usually legally classified as employees. And for just as long, many customers of these businesses have tried to assuage some of the guilt that comes with knowingly using low-paid labor by tipping well.
Yet some companies have incorporated those tips into their workers’ baseline pay, effectively keeping tips for themselves. Essentially, it’s tip theft, and in a New York Times article published this weekend, one journalist experienced it firsthand and energized the conversation around one of the instant delivery era’s most insidious practices.
Andy Newman, a reporter for the Times’s Metro section, spent six days biking around the city as a courier for Postmates, Uber Eats, Seamless, and DoorDash, temporarily joining a workforce typically comprised of people whom Maria Figueroa, director of labor and policy research for the Cornell University Worker Institute called “the most vulnerable workers in digital labor.” Overworked and underpaid, food delivery workers have no guaranteed minimum wage and are frequently injured on the job without access to worker’s compensation.
Depending on what company they’re working for, they may not even reap the benefits of tips. While making deliveries for DoorDash, Newman found that it didn’t matter what his customers tipped him: He never saw a cent of it.
DoorDash offers a guaranteed minimum for each job. For my first order, the guarantee was $6.85 and the customer, a woman in Boerum Hill who answered the door in a colorful bathrobe, tipped $3 via the app. But I still received only $6.85.
Here’s how it works: If the woman in the bathrobe had tipped zero, DoorDash would have paid me the whole $6.85. Because she tipped $3, DoorDash kicked in only $3.85. She was saving DoorDash $3, not tipping me.
The piece sparked heated reactions on Twitter, where multiple threads went viral in anger towards DoorDash’s policy. “I don’t believe that a single person intends to give a tip to a multibillion dollar venture-backed startup,” wrote Wired tech reporter Louise Matsakis. “They are trying to tip the person who delivered their order. This deceptive model should be illegal.”
It’s like they go out of their way to be dastardly pic.twitter.com/QYtkw7BjW7— Felix Salmon (@felixsalmon) July 21, 2019
This policy — and the outrage toward it — is not new. In March, about 200 tech workers and students signed a pledge not to work for DoorDash unless it agreed to pay employees at least $15 per hour. The San Francisco Office of Labor Standards Enforcement also confirmed to Recode that it began pursuing an investigation into the company for potentially violating the city’s labor laws, the first time that the department had launched an investigation into a tech-based gig economy company.
While that investigation could take months or years, other states are tackling the issue as well. In April, New York City Council member Ritchie Torres drafted a bill that would legally require apps to inform customers that their tips aren’t actually going to the person who brought them their order. A California bill this spring made it more difficult to classify gig workers as independent contractors instead of employees. Other California legislators have tried to give those independent contractors union rights, but those bills have gone nowhere.
DoorDash is not the only company using tips to pay its workers’ base wages. In February, the grocery delivery app Instacart was the subject of outrage for the same practice; afterward, it publicly apologized and announced that it would begin paying its workers with a new structure that increased baseline pay from $3 to between $7 and $10.
Vox’s Chavie Lieber spoke to one Instacart employee in May, however, who said that these “fixes” have left her with even less pay than before. “Instacart says our payments are based on some sort of algorithm, but they aren’t transparent with us and none of us know how the payments work,” she said, adding that her income has dropped by 30 percent. Instacart at the time told Vox its payment system was redesigned “to improve, enhance and create clarity around shopper compensation.”
Like many apps, Instacart offers ways for workers to earn bonus pay, by, for instance, receiving a five-star rating from a customer. But the Instacart employee said that the company had made it far more difficult for customers to find the review tool. She also said that the default tip had been dropped to just 5 percent.
Plus, she suspected that the company was still taking workers’ tips. “I’ve spoken with Instacart shoppers who have watched their customer’s phones when they’ve sent a $15 tip,” she said. “It will be confirmed on the customer’s phone, but the Instacart shoppers will still only get a portion of it.”
As Recode’s Shirin Ghaffary notes, the problem of gig economy tech companies is much bigger than tip theft. Even when these companies claim to address unfair policies, they are free to find other ways to avoid paying workers fair wages with little accountability or transparency. And because these workers are still considered independent contractors, they have no way to organize and fight back.
Even when gig workers receive full tips, after expenses they’re still being paid less than what could be considered a decent livable wage — “by some estimates less than $10 an hour after expenses — for jobs that sell workers on a promise of making much more,” writes Ghaffary.
Those promises are often tied to aspirational ideas around the freedom and flexibility of the “side hustle.” But that reasoning ignores the many people who cobble together multiple gig economy jobs out of necessity, yet who aren’t afforded the protections and benefits of a full-time job.
DoorDash, for its part, claims that 80 percent of its workers prefer the current payment model, which was introduced in 2017, because it says it guarantees a predictable amount even when customers don’t tip. The problem is that that predictable minimum is often the only money they’ll see, even when a customer tips them on top of it. In February, DoorDash workers filed a class action lawsuit for tip theft.
The new payment system has seemingly worked out great for DoorDash, though, which is now the top online food delivery service. In May, just three months after raising $400 million, it secured an additional $600 million in hedge fund money, for a total valuation of $12.6 billion. As of October 2018, Instacart also received $600 million in funding for a valuation of $7 billion. Meanwhile, app-based couriers are often paid literal cents for large swaths of time spent on the job.
It’s entirely possible that the public won’t hear a peep from DoorDash in regards to the new report (Vox reached out to the company, which did not immediately reply). New York Times tech reporter Mike Isaac tweeted that it has historically employed the “wait it out” strategy when it comes to scrutiny. “This is what the company is counting on, implicitly,” he writes. “Normal people ordering food don’t really know or care enough to know where their tips are going to complain to the company.”
Apathy toward gig economy workers, be it from their own employers and people who use their services, is the biggest threat to the fight for living wages. As Ghaffary writes, “As long as there’s a deepening income divide in the US and an increasingly two-tiered labor system, the long-term fight over worker pay at tech companies that rely on low-paid contract labor will continue.” Tip theft is only, well, the tip of the iceberg.
Update July 24: DoorDash CEO Tony Xu tweeted that due to “recent feedback” the company would be changing its model to “ensure that Dashers’ earnings will increase by the exact amount a customer tips on every order.” More details will be shared in the coming days.
1/ After a year of research and conversations with thousands of Dashers, we built a pay model to prioritize transparency, consistency of earnings, and to ensure all customers get their food as fast as possible.— Tony Xu (@t_xu) July 24, 2019
It’s unclear what DoorDash’s new payment model will entail, but if Instacart’s public apology and payment structure change is any indication, it may not be as good for DoorDash employees as it is for DoorDash’s public image.
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