DoorDash will pay $131.5 million to resolve allegations that it underpaid delivery workers in New York City, the largest labor settlement in municipal history. The agreement, announced Tuesday by Mayor Zohran Mamdani, requires DoorDash to pay $115 million directly to approximately 264,000 delivery workers, known as Dashers, while an additional $16.7 million will go to civil penalties and compliance costs.
The settlement stems from an investigation by the New York City Department of Consumer and Worker Protection (DCWP), which found that DoorDash failed to comply with the city’s minimum pay laws for delivery workers. Under New York’s pay rules, delivery apps must account for both active delivery time and on-call time—periods when workers are logged into the app but not actively completing deliveries—when meeting minimum-pay requirements. The current minimum rate is $22.13 per hour before tips.
DoorDash admits errors in pay calculations
In a statement, DoorDash acknowledged that its pay practices fell short of requirements. “Simply put, we screwed up,” the company said. “Our mistakes meant some Dashers were underpaid or paid late. While these mistakes weren’t intentional, that doesn’t make them okay.” DoorDash attributed the issues to technical bugs and complicated situations, including orders that crossed city boundaries, involved multiple pickup or drop-off locations, or were partially completed or canceled.
The company maintained that it compensated workers for on-call time through weekly bonus payments but used a different calculation method than the one required by city regulators. DoorDash stated its approach was “fair, practical, and legal,” but agreed to adopt the city’s calculation method moving forward.
Breakdown of the settlement
According to DoorDash, the financial breakdown of the settlement includes:
- $83 million to resolve disputes over on-call time pay calculations.
- $12.3 million to compensate workers who were underpaid or paid late.
- $16.7 million in fines and compliance costs paid to the city.
DoorDash reported that about $6.6 million in payments never reached Dashers, while another $5.7 million was paid days or weeks late. The average payment owed to affected workers is $7.70, with 65% of affected workers underpaid by less than $1. The median payment is expected to be around $48.
New oversight measures required
As part of the settlement, DoorDash must implement a new monitoring system to ensure compliance with local delivery worker wage regulations. The system will allow workers to crowdsource data and share information about their payments with the city, addressing concerns about transparency in how the company calculates wages.
Mayor Mamdani described the settlement as a step toward addressing what he called a “greedy algorithm” approach to worker compensation. “New York City and the tens of thousands of delivery workers who call our city home have reckoned with greed as a business model for far too long,” Mamdani said during a news conference. He cited remarks made by DoorDash CEO Tony Xu in a July podcast, where Xu discussed using a “greedy algorithm” to optimize business decisions.
Policy context and broader implications
The settlement follows a January 2024 New York City law requiring delivery apps to offer customers the option to tip delivery workers at the time of ordering, rather than only after a delivery is completed. The city has framed this as part of a broader effort to strengthen protections for gig economy workers.
DoorDash’s agreement to the settlement and new oversight measures marks another win for New York City in its enforcement of labor laws targeting gig economy companies. The company has faced similar scrutiny in other jurisdictions over its pay practices and treatment of delivery workers.