An issue that has been getting more and more press is how gig economy companies are stealing tips. But they’re doing it in a sneakier way than they’ve done traditionally. The Verge published an article yesterday that highlights this dishonest tactic.
Put simply, a food delivery company might guarantee a certain amount of pay for a task, i.e., $5 for a delivery. But if the customer tips $5, then the food delivery company may only pay the minimum guarantee, effectively pocketing the tip. There are variations and details – the article is quite detailed and links to other journalists that have been working on this issue.
Historically, when an employer wanted to steal your tips, they’d have no choice but to do it in a way that you knew you were being cheated. They would tell you to tip back to certain people that the law says you shouldn’t, or they would pool the tips and then give you a share. When you tipped back to cooks, dishwashers, managers, etc., you’d know who was getting your money and who shouldn’t have been getting it. When the employer pooled tips, you could figure out if there was money missing (money that was going to a manager or the owner or such) by adding up all the people who took out of the pool.
So in most every case, it was possible to figure out that workers were getting ripped off because the workers had a chance to see what the tip was. Figuring out how much was missing was harder, but at least people would know they were getting shorted.
But under the “gig economy,” companies can not only commit wage theft by failing to pay your expenses (we won’t get into that here; that’s a well worn topic), they can also take your tips in a completely hidden way. When a worker gets a tip through the app, the company doesn’t have to tell the worker how much the tip was. So what they do is give you the guaranteed minimum and take away your tip up to the guaranteed amount. It’s a shell game.
Hopefully, by shining a light on these practices, these companies will stop. And the more it gets out, the more customers understand how unscrupulous these companies are. After all, one of the reasons this is illegal in California is because it is a fraud on customers. Customers think their tips are helping the person giving the service, not the business. Of course, like the Verge article says, by misclassifying these workers as independent contractors, these companies are getting around the tip protection law in California.
Lesson learned: I’ll be tipping in cash.
UPDATE July 26, 2019: Apparently after much backlash from consumers, DoorDash recently announced that they will be changing their tipping policy, per the reporting in the WSJ. However, noticeably absent in any reporting update is Amazon, which according to earlier reports faced similar criticism related to their Prime Now delivery business.
*** Note: In California Labor Code section 226 forces employers to give employees detailed wage statements with every paycheck (or online these days). Basically, the law makes it so that it should be easy for employees to check to see how they’re paid. This includes employees who get any commission pay.
About the Author
Kenneth Yoon is the founder of Yoon Law, APC.