On Thursday, the Federal Trade Commission (FTC) announced the approval of a final administrative consent order in a dispute against Amazon. The company agreed to settle allegations that it failed to pay Amazon Flex drivers the full amount of tips received from customers over a two and a half year period.
The order, approved by 4-0 commissioner vote, followed the filing of the FTC’s February 2021 administrative complaint and public comment period. According to the complaint, Amazon Flex was a service launched in 2015 through which qualified drivers could sign up to deliver products to Amazon customers. Drivers were reportedly paid as independent contractors responsible for their own gas, insurance, vehicle repairs, and other expenses. For some deliveries, Amazon reportedly permitted customers to tip their drivers.
The FTC explained that “Amazon consistently has represented both to Amazon Flex drivers and to customers that it will pass on 100% of tips to drivers,” but alleged that the company did not. For more than two years, the company siphoned off nearly one-third of customer tips to subsidize its own pay to drivers, the complaint contended.
The practice that earned Amazon more than $61 million reportedly continued despite complaints, media scrutiny, and internal acknowledgement that its conduct was a “‘reputation tinderbox.’” The company only ceased after becoming aware of the FTC’s investigation in 2019, the commission explained.
This week’s final order requires Amazon to pay the full amount that the company allegedly held back from drivers and the money will be used by the FTC to compensate the aggrieved. Additionally, Amazon will be prohibited from “misrepresenting any driver’s likely income or rate of pay, how much of their tips will be paid to them, as well as whether the amount paid by a customer is a tip.”
Finally, the order prohibits Amazon from modifying how driver’s tips are used as compensation without first obtaining the driver’s explicit, informed consent. The press release noted that for transgressions of the 20 year agreement, Amazon could be liable for civil penalties of up to $43,792 per violation.
