DoorDash and Amazon Customers Find a Tipping Loophole: Give Cash
(Bloomberg) -- Keeping money in a jar isn’t much of an innovation, but as the online delivery boom leaves some couriers feeling shortchanged, customers are re-learning the value of cash. Alanna Prince, a 28-year-old graduate student, relies on apps for nourishment between her academic work, but she doesn’t trust them to distribute her tips to drivers. “I keep a bunch of ones and fives in a jar to tip them all,” Prince said. “I tipped in the app a few times until it came out that those tips are essentially, like, stolen.”
Prince’s suspicions were well-founded. DoorDash Inc., which makes the most popular food delivery app in the U.S., said last week that it would change the way it accounts for tips. Currently, the company guarantees a base pay for drivers that includes gratuity, meaning if customers tip more, the company pays drivers less of its own money to hit the minimum. DoorDash said it’ll revise the policy and pay drivers the entire amount of the tip for each order on top of their pay for the work, though it has yet to offer details.
The change is in response to a flood of complaints from customers and multiple rounds of news coverage drawing attention to the issue since DoorDash instituted the policy in 2017. But there’s another flaw in the pay model besides being a magnet for scorn: Customers can circumvent the system by simply tipping in cash. The company pays those drivers more, and they get the whole tip. Prince and customers like her have come up with a simple, if antiquated, way to undermine the system.
The DoorDash saga offers lessons for Amazon.com Inc., which uses a similar model for Whole Foods and other two-hour deliveries through the Prime Now app. Amazon relies on gig economy work for Prime Now and uses gratuity toward a minimum pay guarantee for drivers. When customers order groceries, the app automatically sets a recommended amount to tip during checkout. Amazon customers can change it on a page that includes disclaimers, such as, “100% of tips are passed on to your courier.” (DoorDash was widely criticized for using a similar phrase in its app.) The Amazon tipping page also specifies: “Cash is not accepted upon delivery.” Yet, in practice, many Amazon drivers are grateful to accept cash tips.
After the DoorDash fracas, Postmates Inc. and Uber Technologies Inc. issued statements assuring customers they give workers the full tip in addition to any promised payments for a job. But because every app isn’t forthcoming about how tips are processed, some customers like Matt Post, 39, have taken to asking drivers what the policy is. “The fact that there are now companies as big as Amazon that are being dishonest with this notion of tipping,” said Post, “it’s just going to push me to doing this through cash more and more.”
For DoorDash, it became a customer service problem. In some cases, customers would become incensed to learn that giving a $6 tip for exceptional service would mean DoorDash contributes just $1 to meet a driver’s guarantee for a particular job. Adam Burling, a 38-year-old fundraiser for a university in St. Louis, said he contacted DoorDash support to demand that the company give his driver the full tip on top of whatever minimum payment the worker was promised. Burling said the delivery and service fees on his order should have covered the base pay for the driver. “I just felt deceived,” he said. “As a former server, I guess I was frustrated, and I can imagine their drivers being frustrated as well.”
Amazon is frequently chided for its treatment of workers. Under political pressure, Amazon raised its minimum pay to $15 an hour last year for most workers in the U.S. and U.K., except for contractors like those who deliver for Prime Now. Above all else, the first leadership principle the company asks employees to adhere to is “customer obsession.” Interviews with customers suggest the tipping policy could violate that principle. “They’re counting on me not asking questions and not knowing how it works,” said David Goldstein, a 56-year-old writer in Seattle. “I don’t like to feel like I’m being made a chump.”
Recent public scrutiny over the tipping issue has raised the specter of government oversight. Gig workers around the world are seeking employment protections, and they won a victory in California last week as major unions urged lawmakers not to exclude tech platform workers from a bill strengthening their rights.
As unpopular as DoorDash’s tipping policy was, the company’s promises of a new model it has yet to outline creates new anxieties. Working Washington, a labor advocacy group, has repeatedly sparred with Amazon, DoorDash and Instacart Inc., and sees the uncertainty around pay as justification for a new law to ensure stability for contract workers. It’s advocating for higher pay that covers on-the-job expenses, tips tacked onto base pay and greater transparency. “The pay-model structures change a lot,” said Sage Wilson, a spokesman for Working Washington. “The long-run solution is to add some legal protections to tips for contractors.” Government intervention is probably not the result Amazon is hoping for.
©2019 Bloomberg L.P.