Amazon has agreed to pay $61.7 million as part of a settlement over charges it failed to pay drivers in its Amazon Flex program the full amount of tips they had received from customers over a 2.5-year period.
The practice of paying just a portion of the tips by the company ran from 2017 to 2019, according to the Federal Trade Commission.
“Rather than passing along 100% of customers’ tips to drivers, as it had promised to do, Amazon used the money itself,” said Daniel Kaufman, acting director of the FTC’s Bureau of Consumer Protection, in a statement. “Our action today returns to drivers the tens of millions of dollars in tips that Amazon misappropriated, and requires Amazon to get drivers’ permission before changing its treatment of tips in the future.”
Amazon Flex is a program in which independent contractors use their own vehicles to deliver orders made through the Prime Now and Amazon Fresh programs. Those workers were promised $18 to $25 per hour, plus 100% of all tips. Instead, the FTC claims, the company shifted workers to a lower hourly rate without informing them, making up the difference with tips—then lied about it when confronted by workers.
Amazon ended the practice when it learned the FTC was investigating. Around the same time, it had another incentive to do so, as DoorDash found itself in the center of a PR hurricane after it was discovered the food delivery company was subsidizing payments to delivery workers using tip money. Despite criticism, DoorDash stuck by that policy through July 2019, when customer and driver outrage hit a new peak.
Amazon will pay the settlement to the FTC, which will distribute the money to Flex drivers. The settlement also bars the company from misleading workers about pay and tip structures in the future.
A 2019 class action lawsuit asserted that Amazon misclassified Flex drivers in the state of California as contractors. Investigations into Amazon’s working conditions and pay are ongoing. Meanwhile, the FTC received a letter from Public Citizen, the Consumer Federation of America, and other advocacy organizations last month outlining the claim that Amazon intentionally makes it difficult to unsubscribe from its Prime service.