DoorDash: Lawsuit from the City of Chicago due to divisive tipping policy (May 2019)
As of September 2021, DoorDash is the largest food delivery service in the United States, delivering 57% of the United States’ food delivery orders in September. However, prior to July of 2019 DoorDash had been using a deceptive tactic in terms of their tipping policy to pay less out of pocket to their drivers. This policy was not only taking away tip money from drivers but was also making it so that DoorDash had to pay less base salary per delivery and would profit even more off of each order. Since November of 2019, they have changed this policy to allow tips to be on top of the base salary, rather than a direct part of it.
|DoorDash Drivers knock on CEO's door to protest wages|
This would lead to DoorDash changing its tipping policy over the course of July to November of 2019. Rather than subsidizing tips into base payment, they would follow the traditional method of tips being on top of base salary. The new tipping policy ensured that “Dashers wouldn't earn less as a result of customers not tipping, DoorDash increased the amount it chipped in per delivery. The company now pays $2 to $10 per delivery out of its own pocket to cover the minimum payment.” (Fortune.com) After this change, there were multiple lawsuits regarding the previous tipping policy, and paying the drivers for tipping money that was subsidized up to that point.
|Attorney General Karl Racine|
|Chicago Mayor Lori Lightfoot|
The stakeholders involved with the DoorDash case would be the DoorDash as a Company, Employees of DoorDash, Previous Consumers of DoorDash, Future Customers with DoorDash, Future Shareholders, and the General Public. The delayed actions of DoorDash to change their policy will affect how their employees and the general public view them in the future. Prior to the change of policy, it was reported that 80% of DoorDash workers prefer the old pre-2019 model over the pre-2017 model, the pre-2017 model being nearly identical to the new one. A statement from DoorDash also says that “Since we implemented our pay model in 2017, Dasher satisfaction has increased while average delivery times have fallen.” (DoorDash Spokesperson) These two factors will heavily affect how stakeholders view this situation, as the change back to the earliest policy goes against what the majority of employees want. The future customers of DoorDash are affected by this as they now have to read through the new policies, and likely will have higher prices to even out the amount of money lost by DoorDash without tip subsidization. In terms of future shareholders, they have to consider these policies as well, and since DoorDash was very delayed in changing these policies until they were forced to, how will they handle events such as these in the future. The general public is affected as DoorDash currently holds 57% of the online food delivery service orders, and this impacts a large number of people around the United States. How these stakeholders are affected and the ties to Utilitarianism with this are explained in the next section.
Individualism as it pertains to DoorDash, Friedman’s individualism where “the only goal of business is to profit, so the only obligation that the business person has is to maximize profit for the owner or the stockholder within the law of the land.” Applying this to DoorDash we can see how the company was using the extra tips to cover the losses they are taking on the mandated tip rate. This is unethical, the employee is entitled to at least know they are losing out on the tip and make a choice if they would want to continue to work for DoorDash instead of thinking they are getting fair treatment. The customer is also entitled to know that if a tip is required then where directly is the money going. To mislead someone so drastically by advertising you are tipping the driver when it's really you’re covering the losses the company has placed on themselves clearly falls into the impermissible category. Regarding Machan’s Individualism “the only direct goal of business is to profit, and the primary obligation of the business person is to maximize profit within the law but: the direct goal of profiting may need to be met by indirect goals and not aimed at profiting, business people may have other goals and those goals may at times be prioritized over the goals of profit-maximizing.”
The impacts the DoorDash lawsuits by the business should worry about the profits yes, but also worry about employees and customers, it may come as a loss but are you a company of enough morals to look at these potential losses and say it’s better for us to lose the tip money or lose the customers and employees. To an extent, DoorDash should be concerned with the profit and the return they are receiving. The company had every opportunity to come clean and say they made a mistake and grew too big to continue this guarantee. Instead, they decided to try and cover it secretly. They gambled and lost. Was it more important to cover a deal they offered to employees or the respect and moral integrity of the company? With these impermissible acts, they are facing a more drastic loss, the customer.
A utilitarian would view this situation as the least ethically beneficial, including how DoorDash handled it and the situation itself. The primary goal of utilitarianism is happiness for the majority of all parties involved. To specifically quote the ethical rule of utilitarianism, “Business actions should aim to maximize the happiness in the long run for all conscious beings that are affected by the business action.” (Salazar 19) Salazar (19) also notes that “The basic method is to analyze the costs and benefits of a particular course of action.” In the case of DoorDash, the happiness of all groups was not maximized, but rather the opposite, which includes the following groups:
DoorDash Company: DoorDash in ultimately every sense lost in this scenario, due to the many different factors involved in this situation. They had to give up over $100 million in lawsuits during this course of time, had to change their policy on tipping subsidization which makes them less money, and lost future customers and employees due to their lack of change until they were required to do so. The slow initiative of DoorDash to pay their workers more, which is still ongoing as of November 2021, will harm them in the long term financially and in terms of future employment opportunities.
Employees of DoorDash: While the tipping policy was reversed so that now tips are not included in base pay, this will likely negatively impact the employees long term. The settlement by DoorDash to give money back to the employees only gave roughly $130 to each member, which is much more than the tipping amount that was subsidized (DoorDash Class Settlement) This also negatively impacts DoorDash employees in the future, as the prior 2017-2019 policy was preferred by 80% of employees, so this does not maximize their happiness.
Customers of DoorDash: The previous customers of DoorDash will not have maximized happiness with this situation, as their tips were not given to the drivers in the normal sense. The customers would be tipping to show appreciation to the driver for them bringing their food, not to subsidize their base pay and pay off their salary. Then in terms of future customers, they would have to deal with potential price heightening from DoorDash, which has already been reported by the Chicago lawsuit, to cover for the tipping money they are not subsidizing.
Future Shareholders: Future shareholders would have trouble trusting the company first off, due to their delayed fixing of company policies regarding tipping. This also applies to the currently pending lawsuit against DoorDash for their policies, and the potential loss of employees and customers gradually over time. The future of the company, especially with the new policy that the majority
Kantianism is based on making and respecting ethical, rational decisions. Ethics is a sense of what is right and remaining loyal to those who work from you and purchase from you. This also means that the person themselves is not above the law or being ethical. Kantianism is in a sense “practice what you preach” what you would preach is making smart and ethical choices based on facts and reasons while helping others to do the same.
Kantianism was not followed when comparing it to the DoorDash tipping policy. The first thing that shows that it does not follow the theory is the ethics part of the theory. Keeping a tip that was promised to someone when you are a billion-dollar company I would argue is extremely unethical. As already stated, these delivery drivers usually do not make a lot of money delivering orders to the customers, so those tips are highly important to them and their livelihood. Another reason why Kantianism would find this impermissible is that DoorDash is not letting its customers make a rational choice when it comes to tipping. Kantianism is big on helping others make rational choices with all the right information available to them. If DoorDash is giving their customer, the right to tip their delivery driver on the app the customer is under the impression that the driver is the one receiving the tip they are giving. This was obviously not correct and was misguiding the customer to tip DoorDash themselves and not the person handling their order. This is not letting the customer make a rational choice since they do not have accurate information on where the tip would be going. Overall, The DoorDash tipping controversy will be deemed unethical by Kantianism.
A Virtue Theorist would look at the way DoorDash handled this situation as ethical. In the views of Virtue Theory, for a business to be ethical they must focus more on the process of getting the goal rather than strictly caring about achieving the goal. With the old tipping model, DoorDash would be considered very unethical according to those 4 virtues.
With the Courage Virtue, it is important to find the middle ground between rashness and cowardice. DoorDash took a risk by not giving out the maximum amount of money to their workers. DoorDash was seeking to maximize their profits which a company should be striving to do so but by taking money out of their worker's pockets is not a good middle ground to settle in. The new tipping policy gave DoorDash room to grow in the Courage Virtue by finding a good middle ground of a larger tip will not decrease the base pay paid by DoorDash.
When it comes to the Honesty Virtue it is key to be transparent with the public about the treatment of employees, customers, business partners in all aspects of the business. By unknowingly using tips to pay some of the base pay, this allows DoorDash to pay out less money to workers in return making them more money. The only issue is DoorDash wasn’t telling people that’s how it worked, they were working in silence. This is the biggest change DoorDash had when it came to the new policy. The settlement forcing DoorDash to be completely transparent with their workers and consumers allows them to put them back on the ethical side of the Honesty Virtue.
The Temperance Virtue is to have reasonable desires and expectations. I think in this case DoorDash has reasonable desires when it comes to them seeking to maximize the money made for the company but their expectations of taking tips away from drivers would never fit into any business model. The Temperance Virtue is the only virtue DoorDash really didn’t change after the settlement because their desires and expectations had nothing wrong with them.
The Justice virtue is hard work, quality products, good ideas, and fair practices. The employees of DoorDash were very hard workers and produces quality products but the practices done on the end of the company were unfair. Taking tips away from people is the same as taking money out of their pocket. Knowingly doing this to your employees is wrong. After the settlement, DoorDash had improved the Justice Virtue to become much more ethical than before. The new tipping policy shows good new practices compared to their old bad ones.
The current issue displayed by DoorDash, in this case, is that they are being extremely unethical towards their employees and customers in a multitude of ways. Firstly, the subsidization of tips to pay for their employees base wages, without notifying them that this is what they were doing. This also impacts their customers, as the tips they are giving are intended to go to the driver directly for exemplary service, not just to pay their base salary. To truly acknowledge this issue, DoorDash needs to be able to admit that they were using deceptive payment methods to their drivers, which they still have not done. The choice to take accountability for what they did will show that DoorDash is aware of what they did and will give them the image they hope to have in that they have responsibility for their actions. Next, they would need to pay reparations to those employees affected by this, and they should receive the sum amount of tips taken and used towards their base pay. This would be the most surefire way to show the company has evolved and would prove that they care about the employees over profit.
The next step would be a rebrand of the company, firstly starting with their mission statement. Their mission statement currently says, “We're working to empower local communities and in turn, creating new ways for people to earn, work, and thrive. We believe in delivering goods by connecting people and possibility.” (DoorDash). There are a few ways this mission statement can be improved after the case, one of which is adding a section regarding deceptive tactics. A new example of such would be, “We’re working to empower local communities and in turn, creating new ways for people to earn, work, and thrive. We believe in delivering goods by connecting people and possibility, while also using fair and honest values to do so.” This new mission statement is not a far cry from the initial, however, it shows they are focusing on the addition of fair and honest methods to help their company thrive.
The new core values for them to follow are commitment, honesty, fairness, respect, and accountability. To improve upon the company, DoorDash will have to be committed to finding a way to improve the company standards and help their employees thrive, not just the company. They will need to be honest, and make sure employees clearly understand how they are being paid, and customers understand where their tip money goes. They will need to change their policy on this payment method to further benefit the employees for their hard work, and make sure tips are directly being used for their initial intent. Fairness to employees is a huge issue and can be addressed the same way, as the employees are not being treated fairly compared to other delivery services due to this case. Respect and accountability finally, which come from DoorDash admitting to their deceptive tactics and building a new future to improve the lives of all people involved. If they can go above and beyond by not just improving the company, but also the employees’ and customers’ experiences, then they can truly move forward from this case.
To prevent this from happening again, they should focus on fully implementing the new tipping utilization so that it is never used for base wages again. They should focus on creating new rules within the company to prevent any more deceptive tactics from forming, and whichever employees can stick to this and come up with a way of doing so can receive promotion. Training would also be beneficial as it would allow employees of DoorDash itself to understand how to be open and clear with the drivers and customers while still being helpful.
All of this will help promote profit and productivity, as it is enticing customers to tip so DoorDash will still be paying the base amount but there will likely be more orders. With this, more drivers will apply to the company and take more orders, making the company profit, and increasing their outreach. This conforms to the mission statement and core values as it is honest and being respectful of those who work for the company, and is fair to all employees across their network, which also ensures good ethics.
Authors: Jeremy Trottier, Brian Wiener, Owen Stanton, Ryan Suprin, Grace Trembley
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