SAN FRANCISCO, September 26 — DoorDash has acknowledged that it underpaid delivery workers in New York City, an admission that the San Francisco-based company said stemmed from a calculation error in how it applied the city’s minimum pay formula. The bottom line: DoorDash said it “screwed up” and committed to making affected workers whole. The company did not specify the total amount owed or the exact number of workers affected.
It also did not disclose the precise cause of the error, though it said the mistake was not intentional. The admission followed a review of DoorDash’s compliance with New York City’s minimum pay standard for delivery workers, which took effect in 2023.
The company said it is working with the New York City Department of Consumer and Worker Protection to resolve the issue. As of the report, DoorDash had not provided a timeline for when back pay would be distributed.
The pay standard at the center of it
New York City’s minimum pay rate for app-based delivery workers was established by Local Law 115 of 2021 and set at approximately $17.96 per hour, adjusted annually for inflation, after a court battle. The law requires platforms including DoorDash, Uber Eats and Grubhub to pay workers at least that rate for time spent on deliveries, excluding tips. The measure was a landmark victory for labor advocates, who argued that delivery workers, many of them immigrants, were earning below minimum wage after expenses.
The law was estimated to raise pay for roughly 60,000 delivery workers in the city. DoorDash, along with Uber and Grubhub, had sued to block the law, arguing it would lead to higher costs for consumers and fewer jobs.
The companies lost that challenge. In 2023, New York City began enforcing the minimum pay standard after a state court lifted a temporary restraining order.
A pattern of legal and regulatory friction
The underpayment issue is the latest in a string of controversies for DoorDash, which went public in December 2020 in an IPO that valued the company at more than $70 billion at its debut. In 2021, DoorDash agreed to pay $5.5 million to settle a lawsuit with the District of Columbia over misleading customers about how tips were used. In 2022, the company settled a case with the California Attorney General for $5 million over alleged labor law violations.
DoorDash has also faced scrutiny over its use of independent contractors, a model that has been challenged in various states and countries. The company has consistently defended its classification of workers as independent contractors, arguing that it provides flexibility.
New York City officials have not yet commented on the admission. The affected workers are those who delivered for DoorDash in New York City during the period when the underpayment occurred, which the company did not specify.
What to watch
DoorDash’s admission of underpayment could lead to further regulatory scrutiny and potential penalties. The incident highlights the ongoing tension between gig economy companies and regulators seeking to ensure fair compensation for workers, and it underscores the challenges platforms face in complying with a patchwork of local labor laws. DoorDash’s stock price has been volatile since its IPO, and the company has faced pressure from investors to improve profitability.
In its most recent quarterly earnings, DoorDash reported revenue growth but continued net losses. The underpayment admission may add to reputational risks.
Investors will note the absence of a disclosed dollar figure and a back-pay timeline. The figure that matters — the total owed to New York City workers — remains unknown.
