DoorDash to pay $5.3M for misclassifying San Francisco drivers

DoorDash will pay $5.3 million to settle a lawsuit brought by San Francisco accusing it of illegally failing to give workers health care and sick leave benefits mandated by the city, the San Francisco City Attorney's Office announced Monday.

The deal covers nearly 4,500 drivers who made deliveries between 2016 and 2020, before Proposition 22 set new worker classification rules for gig companies. It was reached after a federal appeals court found that the law does not relieve gig companies of prior liability for misclassifying workers.

DoorDash did not admit wrongdoing. While the city's health care and sick leave requirements apply to companies with employees, it emphasized that the deal is not an acknowledgment that a judge could have found it to be an employer. DoorDash has maintained that its workers are appropriately classified as independent contractors, pointing to the "flexible earning opportunities and meaningful benefits and protections Proposition 22 affords Dashers across California."

"We feel that this settlement represents a fair compromise that will allow us to focus on continuing to provide the best experience for Dashers," it said in a statement.

City officials had a different view of the case. Although DoorDash did not concede liability as part of the agreement, the city argued the company misclassified drivers for years in defiance of city and state labor laws.

"We are living through an era of deep inequality, and nothing could be more important than ensuring workers are paid fairly and their benefits are safeguarded," said City Attorney David Chiu in a statement. "The city conducted a thorough, diligent investigation that resulted in this unprecedented settlement for San Francisco workers."

Supervisor Aaron Peskin, who initiated in 2019 the complaint that led to the deal, said in a statement the settlement was a "tacit acknowledgment that drivers are workers -- and as such, have rights and protections under the law."

Under the settlement, most drivers will be eligible for payments between $500 and $1,000 depending on how much they worked from 2016 to 2020.

DoorDash and other gig companies may still be on the hook for more damages for the time before 2020 they misclassified workers as independent contractors.

In a blow to app-based transportation businesses, the 9th U.S. Circuit Court of Appeals in September concluded that Proposition 22 is not retroactive. It turned down a bid by Grubhub to free itself of having to pay back drivers during the period workers were allegedly misclassified by pointing to the exemption in the law. The panel allowed drivers to pursue unpaid minimum wage and overtime claims.

The order cleared the way to pursue significant penalties against Grubhub under California's Private Attorneys General Act, which permits private citizens to sue in place of the state to recover inflated damages for labor violations.

The investigation into DoorDash's practices was initiated by a complaint filed with the Office of Labor Standards Enforcement in the wake of scrutiny of the company misclassifying its workers and allegedly using customer tips to subsidize the base pay of workers, according to the city attorney's office.

The office alleged violations of city ordinances requiring employers with 20 or more workers to spend a minimum amount on health care benefits and provide sick leave to all employees. The settlement is the largest secured by the office in its 20-year history.

Instacart last year settled for $750,000 a similar case involving its refusal to provide city-mandated health care and sick leave benefits.