New York City’s Historic Settlement with DoorDash Over Worker Pay

New York City Mayor Zohran Mamdani criticized DoorDash CEO Tony Xu for promoting what he called a “greedy algorithm” during the announcement of the city’s historic $131.5 million settlement with DoorDash. The company was accused of withholding tips from delivery drivers.

Two months prior, Xu had suggested in a podcast that a CEO should pursue greedy algorithms for better short-term results. Mamdani defined a greedy algorithm as making optimized short-term choices without considering consequences. He stated that New York City and its delivery workers have faced such greed for too long.

Thousands deliver for DoorDash and have felt the human cost of the greedy algorithm.

The settlement between DoorDash and New York City came after the Department of Consumer and Worker Protection found that the company systematically underpaid drivers. Mamdani highlighted this settlement as the largest for food delivery workers in U.S. municipal history.

From the total settlement, $115 million will directly benefit delivery workers, with potential payouts of up to $5,000. The remaining funds will go toward fines and developing new software allowing workers to log data from the DoorDash app and share it with the city.

Mamdani explained that delivery workers can now crowdsource data and evaluate the algorithms that affect their pay and schedules. DoorDash must regularly submit driver payment data to the city for the next three years.

Although DoorDash admitted to underpaying workers, the company stated it wasn’t intentional, expressing regret:

Simply put, we screwed up. Dashers should be paid in full, on time, every time.

Mamdani contended that DoorDash’s practices weren’t mere mistakes, noting the company didn’t account for all hours worked by delivery drivers, including time from canceled trips or those crossing city limits. The mayor’s press conference reiterated his commitment to protecting worker rights.

Earlier this year, Mamdani announced a separate $5 million settlement with several companies, including Uber Eats, for underpaying drivers. In another case, his administration secured $875,000 from HungryPanda for allegedly imposing illegal fees on businesses.