DoorDash CEO Tony Xu on the employee vs. independent contractor debate
Restaurant delivery company DoorDash is expected to be part of the post-Labor Day IPO rush, having filed confidential registration documents back in February. But it's also facing an existential threat to its business model and needs to quickly come up with some better rhetorical defenses.
Driving the news: My interview with DoorDash co-founder and CEO Tony Xu was shown Monday night on "Axios on HBO," with a heavy focus on the employee vs. independent contractor debate. At best, he held his cards close to his chest. At worst, he whistled past the graveyard.
Xu argued that flexibility — in terms of when "Dashers" work, which jobs they accept, etc. — is incompatible with being an employee. But he never quite settled on why that is, except that it's the dichotomy that companies like DoorDash have created. When pressed, he falls back on "what Dashers want," without lending much gravity to dissent from politicians, courts or certain Dashers.
- Watch this video clip of Xu explaining why his independent contractors can't negotiate their rates and his thoughts on unionization.
- See Xu talking about Joe Biden and Kamala Harris' opposition to gig economy company efforts to roll back a California law that would categorize their workers as employees.
- He also said the average Dasher now makes $22 per hour, which includes when the app is on but a delivery is not in progress, but he didn't know the cost of typical Dasher overhead (fuel, vehicle depreciation, etc.).
DoorDash was not party to the lawsuit that nearly led Lyft and Uber to suspend ride-hail operations in California, but it's facing a similar complaint brought by the San Francisco district attorney. In an unaired portion of the interview, Xu declined to say what DoorDash would do if a preliminary injunction was granted in that case, except to say the company is "working on all plans."
- Xu also said he hasn't read a proposed "third way" to categorize gig economy workers that Uber CEO Dara Khosrowshahi recently laid out in a NY Times op-ed, but he said DoorDash favors the idea of giving Dashers benefits like portable health plans.
The bottom line: DoorDash in the pandemic evolved from a casual luxury to an essential service. For IPO investors to buy in, though, Xu will need to give more compelling answers on how his company will manage its most glaring risk factor.