GrubHub Will Stop Dipping into Tips from Restaurants

New York State Attorney General Eric T. Schneiderman announced on Thursday that an agreement with GrubHub Inc.,will ensure that the tips it collects from customers who order via the company’s website will be distributed, in full, to the workers for whom they were intended.

“Our settlement with GrubHub changes a billing formula that may have been used by restaurants to shortchange workers out of their hard-earned tips — tips that customers intended for them,” Attorney General Schneiderman said. “In addition, this agreement will leave no doubt among the thousands of restaurants doing business through GrubHub about what their legal obligations are—not only with regard to tips, but also for all laws that protect the rights of workers. Today’s agreement addresses a problem that may have affected thousands of delivery workers, and the industry will be better off for it.”

An investigation by the Attorney General’s Labor Bureau into Seamless found that the company calculated and charged a fee to its restaurant partners based on a percentage of the total food and drink, taxes and tips paid by customers.

Once the fee had been taken by Seamless, the remainder was returned to restaurants. New York Labor Law does not allow an employer, the employer’s agent, or any person from keeping any portion of an employee’s tips. The fee structure used by Seamless may have created an incentive for restaurants to fail to remit the full portion of tips to delivery employees.

The agreement now requires all future GrubHub Inc. contracts with restaurant partners to use a fee calculation that excludes tips. In addition, GrubHub must make efforts to transition those restaurants which still have the old contracts to new agreements in which the method of fee calculation does not involve tips.

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