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Industry Insights

Castillo: Hands in the Cookie Jar

  • National

The hits keep coming for gig economy employers who continue to do everything they can to turn a profit while denying adequate pay and safety net benefits to their workers.

Michael Castillo

Michael Castillo

Last month, the attorney general of Washington, D.C., filed suit against food-delivery service DoorDash, alleging "deceptive" practices that misled consumers into believing their tips were going to delivery drivers when the company was actually using the money to pad the drivers' base pay.

DoorDash announced in August it would update its payment model to address these consumer concerns, but D.C. Attorney General Karl A. Racine is seeking penalties for prior practices of pocketing tips. Under DoorDash's previous model, a driver would be guaranteed a base rate of say $6.75 for a given delivery. If a consumer tipped $3, the driver would still get only $6.75 with the $3 tip being used to pad the base pay.

Under the new model, drivers will be entitled to the tips as an added bonus on top of the base pay per ride, but the lawsuit alleges this doesn't go far enough to correct the wage theft under the prior model, and it intends to recoup millions paid in tips to return to workers.

Also in November, the New York Taxi Workers Alliance, of which roughly half of its members perform work through ride-hailing apps like Uber and Lyft, filed suit against Uber, claiming the company was wrongfully deducting money from their paychecks while also misreporting higher fares to customers and pocketing the difference.

The lawsuit hopes to recoup an estimated $5 million the group says it is owed, which will affect nearly 100,000 drivers.

Meanwhile, the companies are gearing up for what could become one of the most expensive ballot initiative campaigns in California history with their effort to repeal Assembly Bill 5. With almost a year left until votes are cast, the coalition of app-based companies has amassed a war chest of $110 million with Uber, Lyft and DoorDash each ponying up $30 million, and Postmates and Maplebear (the parent company of Instacart) each throwing in $10 million.

Under the initiative, the companies claim drivers will receive better pay and increased protections, but an analysis from the UC Berkeley Labor Center shows that it's just a bunch of smoke and mirrors.

That $110 million could be used to implement changes in safety benefits, pay workers and prepare for when AB 5 takes effect on January 1, but it seems they'd rather spend it on an effort to keep sticking their hands in the cookie jar while denying workers a real wage and safety net like workers' compensation.

Michael Castillo is communications director for the California Applicants' Attorneys Association. This opinion is republished, with permission, from the CAAA website.

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