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Why Amazon, DoorDash, and Instacart Can Use Tips to Help Pay Their Drivers in California

February 12, 2019, 7:37 PM UTC

On-demand delivery companies like Instacart, DoorDash, and Amazon Flex have recently been blasted for how they handle tips that customers earmark for drivers who deliver orders to their doorsteps. In some cases, the companies used the tips to cover some of the minimum payment for the drivers, prompting accusation that the companies were stealing the tips.

Despite the criticism, it turns out that the companies have done nothing wrong—at least by California law.

This practice “would be considered wage theft” at a company with part-time and full-time employees, said Paola Laverde, spokeswoman for California’s Labor Commissioner’s Office. But because the drivers at the on-demand companies are contractors, they aren’t covered by the same protections.

In effect, they’re only entitled to whatever pay is spelled out in their contract. In many cases, that means being paid a set amount per job, and nothing more—and that may mean no tips.

California state law doesn’t cover contractors, said Laverde. And that’s a big blow to on-demand workers given that California is home to most of the on-demand companies.

But that doesn’t stop the drivers from complaining. They say they’re being cheated by deceptive pay policies that robs them of their tips.

Under fire, Instacart changed its policy for how tips are factored into pay. It previously set a minimum payment for each job at $10 but included tips to meet that mark. So if a customer offered a $5 tip, the company only had to pay $5 to meet the minimum. In the end, the worker would get $10 for the job, rather than $15.

Under the new policy announced last week, Instacart will no longer factor tips into minimum payments. Instead, the company will pay workers a minimum of $7 to $10 for deliveries that require them to pick items at stores, pack them, and deliver them. Workers who only deliver will now get a minimum of $5.

Any tips would be added in their entirety on top of those minimums when the policy goes into effort on Feb. 19.

“While our intention was to increase the guaranteed payment for small orders, we understand that the inclusion of tips as a part of this guarantee was misguided,” Apoorva Mehta, Instacart’s founder and CEO, said in the announcement. “We apologize for taking this approach.”

DoorDash and Amazon reportedly have not backed down from their practices.

Amazon Flex guarantees its contract drivers a minimum of $18 to $25 per hour. But a recent Los Angeles Times report showed that Amazon sometimes factors in tips to meet the mark, thereby reducing what it pays out of its own pocket.

“Our pay commitment to delivery partners has not changed since we launched the Amazon Flex program,” Amazon said in a statement. “Delivery partners still earn $18-$25 per hour, including 100% of tips,” skirting the fact that tips can sometimes vanish into drivers’ base pay.

Meanwhile, DoorDash sets a minimum payment based on each job. Tips are used to help the company meet minimum payments for some jobs.

DoorDash did not immediately respond to a request for comment.