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Tipping Your Food Delivery Guy May Actually Be Helping A Big Company

(CNN) -- Food delivery companies are under increased scrutiny over how some worker tips contribute to their base pay. Now some are backtracking on their controversial policies.

DoorDash is the latest service to revisit its tipping policies following a New York Times report that put the issue once again in the spotlight. A reporter spent time as a delivery person and showed how customer tips contribute to worker pay, a policy in place since 2017.

In response to the article's backlash, DoorDash CEO Tony Xu tweeted that the policy would change going forward and Dashers' earnings would increase by the exact amount a customer tips.

"We thought we were doing the right thing by making Dashers whole when a customer left no tip. What we missed was that some customers who did tip would feel like their tip did not matter," he tweeted.

The debate over the role tips play in a person's income isn't new but has been amplified by the gig economy, which is under increasing criticism for its treatment of workers, and how well they are paid. Food delivery companies also face pressure to keep costs low as they seek to go public or become profitable. For businesses desperate to improve their finances, tips are an enticing pot of money.

In recent years companies like DoorDash, Amazon and Grubhub have encouraged customers to leave gratuities, but they often don't reach workers in the traditional sense, according to tipping experts.

In some cases a big tip will contribute to a payment that's already guaranteed to workers. The exact specifics vary by company. A worker may be guaranteed $15 for a delivery, or an hour's work. If their base pay and the customer tip only reach $12, the company will kick in the extra $3. But if the customer left a large tip, pushing the total payment over the $15 threshold, the company wouldn't have to kick in extra money.

The practice is legal, but breaks from the tradition of a tip being money a worker wouldn't otherwise receive.

Tipping experts say consumers are unlikely to be aware that in some cases a generous tip will save the companies money.

Michael Lynn, a professor at Cornell School of Hotel Administration who researchers tipping, told CNN Business these practices are morally wrong.

"This is a defrauding of the consumer," Lynn said. "It's a voluntary payment from the consumer. So it's important that they not be cheated or duped into giving money to a company they wouldn't otherwise do it. I would be willing to tip the delivery person, I'm not willing to tip DoorDash."

The practice of subsidizing worker payments with tips impacts millions of employees outside the gig economy, according to Eli Wilson, a University of New Mexico sociology professor who has studied tipping.

Restaurant servers generally rely on tips. Most state and federal law allows employers to pay a lower minimum wage if employees regularly receive tips.

Wilson said the gig economy has amplified the trend of employers substituting tips in lieu of wages, as these companies seek to shift risk to workers and offload expenses on customers.

"This as a very slippery slope," Wilson said. "In this context, it opens another can of worms to allow employers to use them as a wage replacement when worker earnings are already not particularly high."

When asked about their tipping policies, Grubhub says 100% of tips go to drivers, in addition to their pay. Amazon said workers receive 100% of tips. However, their base pay varies, but they'll always get at least $18 an hour.

The-CNN-Wire™ & © 2019 Cable News Network, Inc., a Time Warner Company. All rights reserved.

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