[co-author: Stephanie Kozol]*
On November 8, Illinois Attorney General (AG) Kwame Raoul and DoorDash, Inc. (DoorDash) reached a settlement to resolve a lawsuit accusing DoorDash of violating Illinois consumer protection law related to alleged misrepresentations regarding tips for delivery drivers. The tipping policy in question was in place between 2017 through 2019.
Pursuant to the terms of the settlement agreement, DoorDash has agreed to pay $11.25 million to resolve allegations that the company misrepresented that delivery drivers would keep 100% of consumer-contributed tips. This practice, the AG claimed, led consumers to believe that their tips would increase workers’ pay above the amount that DoorDash had offered the drivers for completing a delivery. The AG alleged that this practice “encouraged customers to tip as much as possible, indicating that all of their tip would go to workers,” but instead, allowed DoorDash to “get away with contributing as little as $1 toward a worker’s pay and allow tips to make up the rest.”[1] According to the AG, this practice violated the Illinois Consumer Fraud and Deceptive Business Practices Act. DoorDash stopped engaging in this practice in 2019.
The $11.24 million settlement fund will provide court-approved payments to more than 79,000 workers who made deliveries in Illinois between July 2017 and 2019. The settlement fund will also be used to pay associated taxes and administrative costs.
DoorDash also agreed to certain injunctive relief. First, the company agreed to maintain a pay model that does not use consumer tips as a factor when calculating its own contributions to workers’ pay. Additionally, the company has agreed to provide certain disclosures to both workers and customers regarding its pay model.
Why It Matters
As this settlement highlights, subsequent remedial measures do not always insulate a company from prior practices that purportedly violate consumer protection laws. In this case, the Illinois AG sought and achieved remedies for DoorDash drivers who were allegedly harmed years before the settlement by practices that have been discontinued for about five years. The settlement highlights the need for companies to seek and obtain legal advice when implementing policies and procedures that impact consumers or may expose the company to claims of violating consumer protection laws. A strong compliance program now is the best way to inoculate the company against future regulatory enforcement.
[1] Office of the Illinois Attorney General Kwame Raoul, Attorney General Raoul Announces $11.25 Million Settlement Agreement With DoorDash Over Delivery Driver Tips, November 8, 2024, available at https://illinoisattorneygeneral.gov/news/story/attorney-general-raoul-announces-1125-million-settlement-agreement-with-doordash-over-delivery-driver-tips.
*Senior Government Relations Manager
