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FTC Reaches $61.7M Settlement With Amazon Over Claims it Withheld Tips From Drivers

An Amazon delivery van.

Seattle, USA - Feb 10, 2020: Amazon Prime Now Delivery van on 4th avenue late in the day with the Space Needle in the background.

On Tuesday, the Federal Trade Commission (FTC) announced that it reached a $61.7 million settlement with Amazon to resolve claims that it failed to pay Amazon Flex drivers the full amount of customer tips they received during a two and a half year period. The FTC noted that it will use the $61.7 million, which allegedly represents the amount that Amazon withheld, to compensate the Amazon Flex drivers.

Amazon Flex is a program under which Amazon hires independent contractor drivers to make deliveries for the Prime Now and AmazonFresh program using their personal vehicle; the drivers can receive customer tips. The FTC complaint alleged that Amazon and its subsidiary Amazon Logistics advertised that Flex drivers would be paid $18-25 per hour and that drivers would “receive 100% of the tips you earn while delivering with Amazon Flex.” Additionally, Amazon purportedly advertised to customers that 100% of the tips they paid would be given to the driver.

The FTC averred that towards the end of 2016 Amazon “shifted from paying drivers the promised rate of $18-25 per hour plus the full amount of customer tips to paying drivers a lower hourly rate, a shift that it did not disclose to drivers. Amazon used the customer tips to make up the difference between the new lower hourly rate and the promised rate. This resulted in drivers’ being shorted more than $61.7 million in tips.” The FTC proffered that Amazon failed to notify drivers about this change and purportedly “even took steps to make the changes obscure to drivers.” However, Amazon allegedly continued to make the same advertisement promises in terms of hourly rate and tips. The FTC noted that it received hundreds of complaints, particularly as drivers’ earnings decreased. According to the FTC, Amazon stopped this conduct after it became aware of an FTC investigation in 2019. After which, Amazon returned to its previous pay model, with drivers receiving an hourly rate and 100% of customer tips; Amazon gave drivers a breakdown of their pay and tips.

“Rather than passing along 100 percent of customers’ tips to drivers, as it had promised to do, Amazon used the money itself,” Daniel Kaufman, Acting Director of the FTC’s Bureau of Consumer Protection, said. “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.”

Pursuant to the settlement, Amazon will pay $61,710,583 to compensate Flex drivers. Amazon is prohibited from misrepresenting drivers’ likely income, pay rate, percentage of tips they will receive, and if the amount paid by a customer is a tip. Amazon is also barred from making changes to how drivers’ tips are used for compensation without first obtaining informed consent from the drivers.

The FTC voted 4-0 to issue the complaint and accept the consent agreement. The consent agreement is subject to public comment for 30 days.

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