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Grubhub new tip policy in California discourages tips to make themselves look like they are charging less

Quick Reference: Tax and PPP help.

Now that Prop 22 is in play and drivers are being paid a minimum, Grubhub has responded with a new tip policy in California that charges customers extra while telling them they don't need to tip.

Tip jar with currency and coins representing Grubhub's new tip policy
Grubhub is suggesting a $0 tip on several orders in California

Under Prop 22's new minimums, gig companies have to calculate a minimum pay based on 120% of minimum wage, plus 30 cents per mile, along with their tips. Drivers that deliver for a certain number of hours have to be given allowances for certain benefits.

Grubhub's response? Charge more and implement a new policy that recommends $0 tips.

“Y'all don't need to tip now, so just send more money to us instead.”

Thanks.

Testing the new Grubhub tip policy by creating orders in California

I noticed a lot of drivers in California commenting that tips have dropped dramatically. Some said Grubhub isn't even adding a tip any longer.

Was this a new tip policy? Grubhub used to be great at setting a default tip amount. Is it possible they're doing something different in California?

I decided to give it a look. I went through the process of starting an order for where I am in Colorado, and then to a random hotel address in California. Then I chose a national chain so I could create a consistent order, and put together the same order in for both locations.

I'm not really hungry for KFC, and I don't plan on travelling to California to receive the order, so I never actually completed the order. I got as far as the checkout and then canceled.

It was a simple 8 Piece Family Fill Up at KFC.

Differences in fees and recommended tips based on the delivery address

For the Denver location, Grubhub came up with a $20 subtotal, a $3.49 delivery fee, $5.55 taxes and fees, and a default tip of $5.81 (20%).

Total cost to deliver: $34.85

Screenshot of Grubhub checkout screen showing 20% recommended tip with a note saying "tip generously to show your appreciation"
Order screen for a $20 KFC order to a Denver, Colorado address
blown up screenshot of Grubhub order in Colorado with $20 for food, $3.49 for delivery fees, $5.55 tax and fees, and $5.81 driver tip
Order details for a $20 KFC order on Grubhub to a Denver Colorado address

That's one thing that's always made Grubhub attractive as a driver. They have always done well at recommending that people tip.

Then I picked a place I knew in California and started up an order as though it were to be delivered there. Same food, same order, different state.

And much different results.

$20 subtotal. $0.49 delivery fee, $5.69 tax and fees, and $1.50 Driver benefits fee.

And no recommended tip.

Screenshot of Grubhub checkout screen  for a California order showing no recommended tip, with an option to add a "tip on top of the standard Driver benefits payment"
Order screen for a $20 KFC order to a California address
California Grubhub order blown up to show breakdown of payment and fees
Pay detail for a Grubhub $20 order from KFC to a California customer

So what happened to the tip?

There's a place on the order screen where you can choose your tip. On the Colorado based order, it defaulted at 20% but gave me options to change it to 18%, 25% or 30%. The 20% tip amount was added to the order total by default.

On the California based delivery, no tip was added to the order total. The tipping option gave the option to add a tip of $0.50, $1, or $1.50. It was defaulted at $0.

If you click on the little circled i next to the “Leave an optional tip on top of Driver benefits line, you get an extra box that says “Give thanks with a tip. If you would like to tip on top of the standard Driver benefits payment, 100% of your generosity will go to the driver.”

Tips section of Grubhub order screen for a California based delivery, showing options to add a tip of 50¢, $1.00 or $1.50 with explanation "If you would like to tip on top of the standard Driver benefits payment, 100% of your generosity will go to the driver."
The language here is deceptive: “If you would like to tip ON TOP OF the standard Driver benefits payment, 100% of your generosity will go to the driver. That makes it sound like the $1.50 Driver benefits payment goes directly to the driver. It does not.

It gets better.

If you click on the information icon next to the “Driver benefits” in the order totals, you get this message:

In support of California's Prop 22, this payment helps guarantee minimum wage and healthcare benefits for our drivers so they don't have to depend on tips.

Grubhub explanation of the Driver benefits line item for California orders.
Grubhub explanation of "Driver Benefits" line item: "In support of California's Prop 22, this payment helps guarantee minimum wage and healthcare benefits for our drivers so they don't have to depend on tips."

Why is Grubhub's new policy discouraging tips?

Let's be fair. They're not telling people not to tip.

But they are essentially telling customers they don't need to tip. How else would you describe “so drivers don't have to rely on tips”?

This sounds a lot like Uber's old game of “we pay our drivers well so you don't have to tip.”

What is up with this?

My theory is that this is they think they'll avoid a backlash for raising fees that they charge customers.

Here's the thing. Like I said, Grubhub has been great at encouraging tips. They know that if their customers tip well, they can get away with paying as little as possible out of their own pockets.

Except that no longer works in California. Grubhub has to pay more because of the mandates under Proposition 22. The time and distance calculation that was the basis of the Grubhub pay model comes nowhere near minimum wage (let alone minimum wage plus 30¢ per mile).

It costs Grubhub more to deliver in California because of Prop 22.

They need to make up that money somewhere. So they added what they called a “Driver Benefits” fee.

Well, if you eliminate the driver tip, now it doesn't seem like they're charging extra, does it?

Is some of this a backlash because Grubhub didn't want Prop 22?

I'm not TOTALLY sure that Grubhub didn't want Prop 22. But unlike Doordash, Uber, Lyft and Postmates who spent millions to promote the passage of Prop 22, Grubhub was strangely silent. I haven't seen any reports of Grubhub contributing to the campaign at all, and I've speculated before that I wonder if Grubhub wanted it to fail.

It's one thing to reduce the suggested tip. But to eliminate it altogether, and to suggest that tips aren't needed? Something about that seems retaliatory, if you ask me.

Fine, we have to pay more. We'll just make sure drivers don't actually MAKE more.

And then there's this theory about Grubhub's new tip policy in California, which is truly sinister.

Grubhub is definitely playing the evil villain with their new tip policy in California

It started out as a theory that I threw out a couple of times. After reading in the LA Times that Grubhub's response is that drivers are already making 20% more under Prop 22, it makes even more sense.

Grubhub doesn't want drivers to make more.

They don't WANT you to tip their drivers in California.

Here's why.

Delivery fees to drivers are up under Prop 22. If tips are the same, drivers make more. And that's a problem for Grubhub.

Why is it a problem?

Because if drivers are making more money, delivery driving is more appealing.

When delivery becomes more appealing, more drivers think that doing this full time makes sense.

And there's your problem. It's all about Prop 22. Because under Prop 22, if you drive 15 hours per week for any particular app, they have to provide a stipend for healthcare. At 25 hours per week, they have to cover you 100%.

The other thing about Prop 22: Drivers are still independent contractors. Grubhub cannot control schedules, they cannot tell drivers not to drive.

But they can tell customers they don't need to tip.

Are Doordash and Uber Eats doing the same thing?

Business Insider reported that Doordash and Uber Eats will charge more as a result of the increased costs of Prop 22.

So, I did the same experiment. In fact, all three companies deliver from KFC, so I started the order process for Doordash and Uber Eats.

What I saw was that they seem to be doing something similar, but not nearly to the extent that Grubhub is.

Doordash is recommending a lower tip amount than in Colorado.

When I went through the order process on Doordash, with the order for the same exact items from the same exact stores, the delivery charges were nearly identical except for the recommended tip.

In Colorado, Doordash defaulted to a $6 tip. In California they defaulted to $3. Both locations waived the $3.99 delivery fee. Colorado had a $4.77 Fees and Estimated Tax charge, while California's was $4.80.

Side by side of orders from Colorado and California for the same items, with the only major difference being the lower default tip in California
Side by side of orders from Colorado and California for the same items, with the only major difference being the lower default tip in California

Unfortunately I have no information to gauge whether or not Doordash has always recommended a lower tip amount in that area.

The Business Insider article indicated that Doordash would just increase their service fee. Again, I have nothing to compare with, so I don't know if the “Fees & Estimated Tax” in California would have been lower prior to Prop 22's implementation.

It's possible the fees were higher in Denver prior to Prop 22, because Denver puts a 15% cap on Delivery commissions. Again, without a ‘before' for California, it's hard to say.

Uber Eats is showing an additional fee and a slightly lower tip amount in California.

Same process, same restaurant, same order.

Uber Eats adds a $2 “CA Driver Benefits fee, which looks very similar to Grubhub's fee. But they still have a default tip amount listed. On the California order, it was at 15% compared to 18% in Denver.

Side by side comparison of same order in California and Colorado with Uber Eats charging extra $2 fee in California and lower tip percent

Again, I don't know if that's normal that they have a different default tip percent in different states. That said, it looks like they did something similar to Grubhub, in that they lowered the tip amount a little, added the extra fee, so in the end it doesn't feel like it's costing dramatically less.

Grubhub doesn't seem to be doing this new tip policy on every order

For fun, I tried out different restaurants, all with the same address. On some orders, Grubhub suggested a 15% tip. On others, they did the same thing they're doing here.

Overall, three out of the five restaurants I looked at had Grubhub suggesting no tip at all.

I have no idea why they do this on some and not on others. I don't know if it's that they haven't fully implemented the charge or what it is.

How does fewer tips under this Grubhub policy impact driver pay?

The best thing I can think of is to compare to some of my own deliveries.

I looked at a random month of Grubhub deliveries. In that month I drove 1,244 miles, and was on active deliveries for 84.02 hours (I actually track my time and miles for every delivery, so I have that data).

I made $783 in delivery fees and $1,309 in tips for that month.

I ran the numbers. If I were paid under Prop 22, I would have made nearly $900 more in delivery fees than what I did earn.

I still would have needed to make $409 in tips to break even with what I earned.

I could have had a 50% reduction in tips under Prop 22 and still have been ahead.

However, a total elimination of tips would have cost me about 20% of what I made that month.

What's the fallout going to be with Grubhub pulling this new tip policy?

what's the fallout going to be of Grubhub's tipping elimination?

That will be interesting to watch.

Drivers are noticing. I'm already seeing it discussed in forums.

I work with multiple apps. If I'm seeing several offers coming in on Grubhub with no tips, and all the others are offering tips, how long do you think I'll stay with Grubhub?

Maybe that's what they want. I wonder if that's their end game: Weed out the cherry pickers.

Now that there's a minimum wage, maybe they think they can get enough people who will take everything.

I'm glad I'm not in California. But even in Colorado I have to tell you I'm seriously re-thinking my relationship with Grubhub, with what they're pulling in California.

For them to tell customers they don't need to tip is not acceptable. Anywhere.

Could this help someone else? Please share it.

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Vinnie

Wednesday 30th of December 2020

Hi, first off thank you for your research!!!

I am a Grub Hub driver in California. The reason I see them doing this is because Grub hub offers a bonus to orders with little or no tip for their pro and premier drivers. If the customer tips well they don’t add the bonus so and we keep the tip. Now since tips don’t count towards the minimum wage clause in prop 22 but GH contributions even bonuses do. They are discouraging the tips so that they could add the bonuses and we reach our minimum hourly leaving no extra payment to reach minimum wage on mondays. Keep in mind this is a company that paid about 12 cents a mile. This is largely cheaper because they don’t have to pay the 30 cents a mile and extra for minimum wage. GrubHub is notoriously cheap when it comes to paying out of their pockets specially mileage.

Also they added clauses to kick you off if your acceptance is low so you have to do these orders or your out of work.

DIANNA COOMES

Tuesday 29th of December 2020

I live in California in a smaller area. My area is different then most on so many levels. 1 Our minimum was 4 dollars higher than the areas surrounding us. 2 we sometimes have orders up to 20 miles away. 3 it is rare that we have more than 2 drivers on block at a time. I'm the only premier driver (trash collector)in my area and have been for going on a year. Up till now I worked solely for Grubhub starting at the beginning of the pandemic. My totals last year were $15000 in tips 2700 total deliveries 18000 miles. However Grubhubs behavior is making me rethink my loyalty. I used to average 40% of my income in tips. Now its not even 10%. I've always averaged 10 orders a day but at least 60% of these were over 10 miles away. To sum it up im doing the same amount of work and logged in the same hours for half the pay. So if there doing this to weed out the cherry pickers. They are also getting rid of the trash collectors to

Z

Sunday 27th of December 2020

The more interesting thing with all of this, is as a driver they are now offering a bonus $ amount on pretty much every order that you would only see before if the order was super late and no one was taking it. My conspiracy theory is maybe they can use this bonus as a write off since now they have to pay out health benefits and more pay of the sort. Very curious what all this bs is cuz the new tipping is trash even if I am making the same because of the added bonus ontop of the regular pay

ronald.l.walter

Monday 28th of December 2020

I've got a theory on the bonus. The usual delivery fee from Grubhub is far short of the 20% of minimum wage plus 30 cents a mile. I think they're figuring out that they're going to have to pay a LOT more than their current formula for delivery fees. So if they calculate the 'bonus' to reflect the higher amount they have to pay out anyway, that makes it less likely that offers get rejected. The delivery fee on a 20 minute 2 mile delivery is usually going to be around $3 - and if the tip is terrible, drivers are going to reject that delivery all day long. But under Prop 22, they have to pay out $5.80 for that same delivery. So why not just let the offer amount reflect that extra right away and make it more likely that a driver will accept it?

What you said at the end reminds me of what's so frustrating about this. I think you're like a lot of people, probably not making less because of the tipping policy, but not really making more because of the higher delivery fees either. It's almost like Grubhub has something against drivers actually earning more money now that all this is in place. Why would any company do that? It's just kinda scummy.

Boogz

Sunday 27th of December 2020

Thank you for this. It was super informative. I live in a California and have only been driving with grubhub for a few weeks. I had no idea they were even doing this. Now I'll be on the look out.

Vinnie

Wednesday 30th of December 2020

@ronald.l.walter, with the new agreement you can be kicked off the platform because of acceptance ratings so if you fall below 85 percent you lose benefits and run the risk of getting kicked of if you fall be low I think 60 percent. This is in there new agreement

ronald.l.walter

Monday 28th of December 2020

The main thing that comes to mind for me is that you just be selective on what you're taking. It doesn't seem like they're doing this all the time, and it seems to happen more often on fast food type deliveries. No idea how they decide when to do this.

Jim

Saturday 26th of December 2020

Good article. The only thing is we are given 120% of min wage only during "active time" - the time from which you accept an order until you drop it off- which for most drivers is about 15-20 min an hour. So that guaranteed pay equals about $4-6 per hour. Not nearly what they make it sound like. Grubhub is the worst. They've turned a law meant to help drivers against drivers. I'm sure they will roll this model out everywhere if it is successful here. Boycott Grubhub. They really suck. #boycottgrubhub

Vinnie

Wednesday 30th of December 2020

@Jim, Active time means time selected to be available for orders. So if you are on a block your guaranteed 120% of minimum for all time signed in and taking offers whether you get any or not. Prop 22 is very specific on this, that was one big complaint of lawmakers.

ronald.l.walter

Monday 28th of December 2020

The big question is, how well are they even tracking engaged time? Most drivers aren't going to track that themselves, so there's a huge opportunity for them to short change drivers.

My experience has generally been that Grubhub kept me busy enough that engaged time was still a good 50-55 minutes out of the hour. Lately they've slowed down considerably in my market, either they're losing so many customers or they have too many drivers.

To be at 15-20 minutes per hour of engaged time, that would mean you'd be getting only one offer per hour, 40-45 minutes between. If things are truly that slow, a person should be firing up other apps and getting offers from them in between. I know some feel like they're cracking down on multi-apping, but the main thing they're cracking down on is the extremely late deliveries that come when someone is picking up more than one delivery at the same time. Under Prop 22, they can not prohibit you from taking an offer from another platform between deliveries, though the language does allow them to prohibit you from delivering for more than one app at the same time.

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