Amazon agreed to pay nearly $4M to settle a lawsuit alleging that it stole over $60M in tips intended for its Flex delivery drivers, effectively subsidizing its labor costs using the tips, which customers assumed were being given in addition to their driver's normal pay. To settle the lawsuit, Amazon will pay $2.45M in penalties plus $1.5M in legal fees. It also must disclose on its website and app moving forward how customer tips impact driver earnings.
This settlement is in addition to the $61.7M that Amazon was required by the FTC to reimburse drivers with when the agency brought similar charges against the company several years ago.
Here's what went down:
Upon launch of Amazon's Flex business in 2015, Amazon represented to customers that all tips added during checkout for Amazon Flex orders would go to drivers, but Amazon changed its payment model in late 2016 to lower its costs and did not disclose the switch to either customers or drivers.
What changed? Amazon began algorithmically reducing driver wages in different locations using data it collected about average tips, and then used the tips to make up the difference between its new base pay and the $18-$25 per hour it had promised drivers.
Amazon didn’t stop taking the tips until 2019, when the company found out that the FTC was investigating the issue.
Although Amazon settled with the FTC several years ago and reimbursed drivers with over $60M worth of tips, DC Attorney General Brian L. Schwalb filed this separate lawsuit in 2022 to reprimand Amazon and require the company to change its tip disclosures.
Amazon spokesperson Steve Kelly said in a statement, “Like any successful program, Amazon Flex has evolved over time, and this lawsuit relates to a practice we changed more than five years ago.”
Doesn't Amazon higher the best and the brightest at its organization? If so, who in their right mind thought it was a good idea to use tips to reduce driver base pay? That's low, even for Amazon.