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Drizly to pay $4m in withheld tips

Defunct on-demand alcohol platform Drizly has been ordered to pay US$4 million in lost tips to New York delivery drivers.

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Over 8,300 impacted drivers are eligible to receive the settlement

More than 8,300 Drizly workers in New York were found to have tips withheld from them by the now-closed on-demand alcohol delivery service, New York attorney general Letitia James has announced.

In a restitution agreement mandated by the New York Office of the Attorney General (OAG), Drizly must pay US$4m to delivery workers employed by stores that used the platform. An additional US$200,000 must also be paid by Drizly to cover the settlement administrator, which the OAG said will track and disburse the restitution funds to these delivery workers.

Drizly, previously owned by Uber, was closed by the ride-sharing firm at the end of March this year – having been in operation in New York since 2013. Uber said it ditched Drizly to focus on its Uber Eats platform.

The investigation, conducted by James and the OAG, found that Drizly had not paid workers their rightfully-earned gratuities even after the service had encouraged its customers to leave them, as well as an automatic 10% tip at checkout.

James said: “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.

“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. My office will always take on companies that mislead their customers and workers and undermine the laws meant to protect them.”

Tips not ‘properly distributed’ 

In the state of New York, 2,453 stores used Drizly with more than 80% of orders delivered by store employees. James noted that Drizly led customers to believe that the entirety of tips would go directly to the delivery workers who earned them. Instead, she found that the gratuities went to store owners for distribution.

The investigation uncovered that tips for these drivers were sent by Drizly to the store owners, who would decide how they were distributed. Moreover, the OAG alleged that Drizly also ‘encouraged liquor stores to engage in tip pooling’ (splitting the money among all employees rather than giving them directly to the workers who earned them), which is an unlawful practice for liquor store employees in New York.

As well as enabling and encouraging unfair tipping practices, the investigation also accused Drizly of ‘deceiving customers’ through a default tip.

On its platform’s checkout screen, where a default 10% tip was added, Drizly had written: “We provide you with the opportunity to tip your driver from our apps or website. The default tip is 10% of your order total, but you may adjust the amount according to your preference. We humbly ask that you tip drivers, as they are critical in making every Drizly delivery a reality.”

It was seen that Drizly ‘failed to adequately notify’ customers that the tips would not go directly to delivery workers, or at least make it known that stores were responsible for tipping their employees. The investigation noted that therefore ‘many customers were led to believe that the full amount of the tip they paid was going to the delivery worker who delivered their order’.

Citing surveys, James added that an ‘overwhelming majority’ of delivery workers in New York are non-white, more than 80% work full-time as delivery workers, and nearly half support a child or family member on the delivery worker salary.

Uber: ‘doing the right thing’

A Uber spokesperson said: “While it operated, Drizly’s business model put its retail partners in control of the alcohol sale end-to-end, including arrangement of delivery to the consumer. Drizly did not collect consumer payments and did not receive any portion of the tips the state alleges were not paid to the appropriate recipients.

“Nevertheless, on behalf of Drizly, Uber is doing the right thing by compensating drivers, and we are pleased to put this matter behind us.”

The company stressed that it partners with local liquor stores, which list their products on the Drizly platform and fulfil orders using their own workers or a third-party deliverp app.

Uber noted that users of the Drizly app users transacted directly with individual retailers when they placed orders. The company also highlighted that in instances where the full tip wasn’t passed on to the worker, it would have gone into the pocket of the retailer, not Uber.

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