Recently, a New York Times reporter decided to explore the world of food delivery apps from the street level: Andy Newman worked for a few days delivering food by bike in New York City for a variety of companies. His article is full of interesting details about how the different apps work from the deliverers’ perspective, such as how delivery people decide which jobs to take and which to pass up, and more.
Newman’s project also exposes how little these gigs pay: Because virtually all food delivery companies treat those who deliver for them as independent contractors rather than employees, these workers are not entitled to the minimum wage or overtime. One delivery company paid a worker only 83 cents for waiting more than 20 minutes to pick up an order.
Newman’s “behind the scenes” account had a big impact on one company: DoorDash announced changes to its tip policy after Newman revealed that customer tips paid via the app were not passed along to delivery people.
Who Gets To Keep Tips: What the Law Says
If the food deliverers were employees rather than independent contractors, the law would protect their right to tips. Generally, customer tips to an employee belong to the employee, with a couple of big exceptions:
- Some states allow employers to pay tipped employees less than the minimum wage, as long as they earn enough in tips to make up the difference. Under these tip credit laws, employees get to keep all of their tips, even if they end up earning significantly more than the minimum wage.
- Employers can require employees to contribute a portion of their tips to a pool shared by a group of employees. The employer doesn’t get to take a portion of the pool, however.
Because drivers are independent contractors rather than employees, they don’t get the benefit of these rules. Legally, companies don’t have to pass tips along. But some do. (If you want to find out how your favorite food delivery app handles tips, check out this helpful guide from Marketwatch.)
Why Let Drivers Keep Their Tips?
Why would these companies pay tips to workers if the law doesn’t make them? A few reasons come to mind. First, delivery workers will be happier if they get those tips. Although gig companies don’t seem overly concerned with worker satisfaction, they need drivers to stay in business. Second, the legal status of these workers as independent contractors rather than employees is a bit shaky. If the government finds they are actually employees, a company that has been keeping tips will be in deeper trouble. And finally, customers tend to feel tricked and angry if the tip they thought they were paying a delivery driver goes to the company instead. DoorDash’s CEO owned up to this in his Twitter post explaining the change in policy; he admitted that the company “missed” that customers might feel their tips didn’t matter under the old system.
To learn more about rights and protections for workers, see Legal Consumer’s wage and hour law learning center.