Eye On Illinois: Is DoorDash settlement decisive victory for drivers or another business expense?

Numbers tell a story, but rarely without help.

On Friday, Illinois Attorney General Kwame Raoul announced his office reached a preliminary settlement agreement with Chicago’s DoorDash, a leading app-based food delivery service. If a Cook County judge agrees, the company will pay $11.25 million to end a lawsuit alleging it violated the state’s Consumer Fraud and Deceptive Business Practices Act.

“DoorDash encouraged customers to tip as much as possible, indicating that all of their tip would go to workers,” Raoul said. “Instead, DoorDash used tips to reduce the amount the company paid workers. By putting tips toward driver pay, DoorDash could get away with contributing as little as $1 toward a worker’s pay and allow tips to make up the rest. This settlement ensures tips from customers end up where they were intended to go: into the pockets of delivery drivers.”

Let’s do some math. According to the agreement (available at tinyurl.com/DoorDashTerms), the company identified 79,262 “Dashers” who made a delivery in Illinois from roughly July 2017 through September 2019 and would be eligible for compensation. That means the starting point for recovery is $141.93 per driver – about $5.38 per month.

The amount gets a little smaller after removing the fee for Atticus Administration to handle the payouts. That’s arguably a bargain in that the firm figures it’ll cost about $2 per driver to build a website, log claims, file reports with Raoul’s office and comply with court and IRS requirements on top of issuing the payments through wire transfer, ACH, digital or physical prepaid cards or mailed checks.

Unlike settlements resulting from private litigation, there isn’t a specific carve-out here for the plaintiff’s attorneys, which sometimes can cover a third of the overall payout. The AG’s Workplace Rights Bureau handled the litigation, specifically Assistant Attorney General Samantha Kronk and Bureau Chief Alvar Ayala.

Also, the relief goes beyond dollars: Among other conditions, the settlement obligates DoorDash to conduct itself properly going forward by giving 100% of tips to drivers and barring it from factoring gratuities when calculating driver compensation. Future Dashers will, at a minimum, be able to see the estimated distance and minimum pay for each order before accepting. After delivery, drivers will get itemized earning summaries.

An implied benefit is the potential warning to other companies that might pursue similar strategies. But that’s where things get subjective. DoorDash is trading around $175 per share with a market cap of $71.2 billion. Its recent quarterly report claimed more than a 20% increase in orders and revenue. In that context, this payout – for which affected drivers have waited five to seven years – seems like little more than the cost of doing what appears to be a fairly lucrative business.

• Scott T. Holland writes about state government issues for Shaw Local News Network. Follow him on X @sth749. He can be reached at sholland@shawmedia.com.