Amazon has agreed to pay $61.7 million after being accused of withholding tips from its Amazon Flex delivery drivers, the Federal Trade Commission announced on Tuesday.
Similar to Uber and Lyft, the Amazon Flex program allows drivers who are classified as independent contractors to deliver parcels through use of their own vehicles. Under Amazon’s own advertising, drivers are promised payments between $18-25 an hour, in addition to keeping 100 per cent of customer tips, the FTC complaint alleges. In addition, customers were also told that 100 per cent of their tips would go to the drivers.
“Rather than passing along 100 percent of customers’ tips to drivers, as it had promised to do, Amazon used the money itself,” Acting Director of the FTC’s Bureau of Consumer Protection Daniel Kaufman stated.
Amazon reportedly lowered the hourly rate that the drivers were being paid in 2016 without disclosing the change to drivers, and instead used the driver’s tips to make up the difference, according to the FTC. The practice continued unnoticed for two and a half years and only stopped in 2019 when Amazon became aware that it was under investigation by the FTC, according to the FTC statement.
The FTC alleges that Amazon attempted to cover up its new payment method so drivers would remain ignorant of it, according to the complaint. Amazon has challenged the allegation.
“While we disagree that the historical way we reported pay to drivers was unclear, we added additional clarity in 2019 and are pleased to put this matter behind us,” an Amazon spokesperson told Business Insider. “Amazon Flex delivery partners play an important role in serving customers every day, which is why they earn among the best in the industry at over $25 per hour on average.”
According to the complaint, hundreds of Amazon Flex drivers complained when they noticed the amount of money they were making had decreased. However, the official response to their complaints asserted that the drivers were keeping 100 per cent of their tips. According to the FTC, employees referred to Amazon’s handling of the situation as a “reputation tinder box,” describing it as a “huge PR risk.”
The FTC states that under the terms of the settlement, Amazon will pay out $61.7 million to compensate drivers for lost income. Amazon will also be prohibited from making any changes to its payment policies without first obtaining the consent of its independently contracted drivers.