Uber to pay $4M after delivery workers were denied their tips

Hundreds of Brooklyn stores tied to Drizly’s tip mismanagement

December 18, 2024 Robert Abruzzese, Courthouse Editor

Attorney General Letitia James announces a $4 million settlement with Drizly, addressing withheld tips meant for delivery workers. Photo: Bebeto Matthews/AP

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New York Attorney General Letitia James has secured $4 million in restitution for more than 8,300 delivery workers across New York State after finding that Drizly, an alcohol delivery platform, failed to ensure tips went directly to the workers who earned them.

The investigation by the Attorney General’s Office revealed that while Drizly encouraged customers to tip, including a default 10% tip at checkout, it sent those tips to store owners instead of the delivery workers. Store owners, who either employed their own delivery staff or outsourced deliveries, were responsible for distributing the tips. Drizly did not enforce any mechanism to guarantee workers received their earnings.

“Drizly misled its customers by encouraging them to tip and then failing to make sure those tips went to the delivery workers who earned them,” said Attorney General James. “So many delivery workers work paycheck to paycheck and denying them their hard-earned tips could mean the difference between making ends meet and not being able to put food on the table. Now, we are finally returning this money to those who actually deserve it and who customers intended it would go to.”

Drizly, which began operating in New York in 2013, was acquired by Uber in 2021 and shut down earlier this year. Across New York, 2,453 stores used the platform, including 367 in Brooklyn, one of the highest concentrations in the state.

The platform also promoted “tip pooling,” a practice that splits tips among all employees rather than the specific worker who delivered the order. This practice is unlawful for liquor store employees in New York, but Drizly continued to encourage it.

The settlement requires Drizly to pay $4 million to delivery workers, with an additional $200,000 allocated for a settlement administrator to oversee the disbursement. Funds will be distributed to workers employed by stores that used Drizly’s platform.

The settlement against Drizly highlights ongoing questions about how tipping affects workers’ pay. While customers were encouraged to tip delivery workers, Drizly did not ensure those funds were properly distributed. Workers often relied on tips that didn’t always reach them, while customers believed they were directly supporting employees.

The case raises broader concerns about tipping and wages, especially in industries where workers depend heavily on tips for their income. In these systems, customers effectively contribute to employees’ earnings through tips, while businesses avoid taking on their responsibility of paying fair wages. Without safeguards, workers can be left with inconsistent pay despite their critical role in operations.