Grubhub removed the default tip in California to mask new fees

Under Proposition 22, food delivery companies charge customers a new service fee to cover worker benefits, but Grubhub has made tipping easier to sidestep.

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Grubhub no longer encourages customers to leave a tip for drivers, though they still can. Whereas the food delivery app used to set a default tip of 20 percent which customers could then adjust, the app now sets a default tip of zero percent and leaves it wholly up to users to decide whether to tip and by how much.

The change comes following the institution in California of Proposition 22, a new law that guarantees certain benefits for gig workers. Companies like Grubhub and Uber recently began charging customers an additional "Driver Benefits Fee" that can be as high as $2, meant to cover healthcare stipends, a minimum earning rate, and a credit of $0.30 per mile for vehicle expenses... but many don't qualify for the benefits.

Understandable rage — Despite Californians voting overwhelmingly in favor of passing Prop 22, Twitter shows that sentiment around the new fee is far from positive:

Luxury meets necessity — Food delivery is already a luxury, with a litany of fees tacked on at checkout that can sometimes double the cost of the order. Grubhub's change to default tips looks like an attempt to soften the blow of new fees in terms of the total customers see at checkout.

Other apps, notably Instacart, have received pushback in the past for affecting worker earnings by tinkering with the way tipping works in their apps.

Drivers for Grubhub who spoke to the Financial Times say that the impact to tips from the change has been significant and immediate. One driver in San Francisco said on two consecutive Saturdays she completed the same number of orders, eight, but five fewer people tipped following the alteration to the app. Before the change she made $61.03 in tips, but afterward, she netted just $24.71.

In effect, the loss in tips may counteract any wage increases or other benefits derived from Prop 22 for many gig economy workers.

Vampires — Grubhub collects upwards of 35 percent in fees from restaurants for essentially managing a directory and payment system. In other words, a small amount of employees at one company are taking a huge bite out of the restaurant industry in exchange for very little work, while those who make it all possible — the delivery workers — are paid a pittance for tiring work.

The problem is quite simple. By inserting themselves into the chain, there are now three parties that expect to get paid for each food delivery: the driver, the restaurant, and now the app provider. Considering margins are already slim in the service industry, it's unsurprising that drivers are getting the short end of the stick.

DoorDash, UberEats, Grubhub, and other delivery apps can't raise prices for customers to pay workers a living wage because then the services likely won't be seen as affordable enough by enough consumers to generate growth. These companies could pay drivers more out of their own coffers, but that would reduce the profit potential they've sold to investors. Restaurants, meanwhile, need any business they can get right now, so they keep offering delivery just to break even, and if they don't participate in delivery apps and rely exclusively on their own delivery people, they're likely to see a huge drop in orders.