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Ordered to Pay $61.7M, Amazon Slammed for ‘Conduct That Hoodwinks Workers’

Amazon will pay more than $61.7 million to settle Federal Trade Commission (FTC) charges it failed to pay Amazon Flex drivers the full amount of tips they received from Amazon customers over a two-and-a-half year period.

The FTC’s complaint alleges that the company stopped its behavior only after becoming aware of the FTC’s investigation in 2019. The $61.7 million represents the full amount that Amazon allegedly withheld from drivers and will be used by the FTC to compensate drivers. The settlement prohibits Amazon from misrepresenting driver earnings, pay or percent of tips paid to drivers or changing its handling of tips without drivers’ consent.

According to the FTC’s administrative complaint against Amazon and its subsidiary, Amazon Logistics, the company regularly advertised that drivers participating in the Flex program would be paid $18 to $25 per hour for their work making deliveries to customers. The ads, along with many other documents provided to Flex drivers, also prominently featured statements such as: “You will receive 100% of the tips you earn while delivering with Amazon Flex.”

“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.”

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Amazon will pay more than $61.7 million to settle FTC charges it failed to pay Amazon Flex drivers the full amount of tips they received.
An FTC document on the alleged scheme. FTC

Amazon Flex is a program in which drivers, classified by Amazon as independent contractors, can agree to make deliveries using their personal vehicles. Flex drivers deliver goods and groceries ordered through the Prime Now and Amazon Fresh programs, which allow customers to give the drivers a tip.

The FTC’s complaint alleges that, in addition to telling drivers they would receive 100 percent of their tips, Amazon also assured its customers that 100 percent of any tips they paid would go to the driver.

In late 2016, the FTC alleged, Amazon shifted from paying drivers the promised rate of $18 to $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 alleged that the company then intentionally failed to notify drivers of the changes to its pay plan and even took steps to make the changes obscure to drivers. After making the change, the company continued to promise drivers and customers that 100 percent of tips would be passed through to drivers.

Amazon received hundreds of complaints from drivers after enacting the change, as drivers became suspicious when their overall earnings decreased. Drivers who complained received form e-mails falsely claiming that Amazon was continuing to pay drivers 100 percent of tips. Internally, Amazon employees referred to the company’s handling of the change and driver complaints about it as an “Amazon reputation tinderbox” and “a huge PR risk to Amazon.”

According to the FTC’s complaint, Amazon continued using the new pricing model despite complaints from drivers and negative media coverage until August 2019, after the company received notice of the FTC’s investigation. At that time, Amazon returned to a pay model where it pays drivers an identified base amount plus 100 percent of tips and gives the drivers a breakdown of their pay and tips.

“Fortunately, today’s action to redress the company’s victims does not prevent the FTC or state attorneys general from assessing whether Amazon has engaged in a broader pattern of unfair practices in violation of the antitrust laws,” FTC commissioner Rohit Chopra said. “Today’s order provides substantial redress to the families victimized by Amazon’s anticompetitive deception. However, this cannot be the only action we take to protect workers and families from dominant middlemen. The FTC will also need to carefully examine whether tech platforms are engaging in anticompetitive conduct that hoodwinks workers and crushes law-abiding competitors.”

Chopra said the FTC has historically taken a “lax approach to worker abuse, entering no-consequences settlements even in naked wage-fixing matters that are criminal in nature. I hope that today’s action turns the page on this era of inaction.”

He said he agreed with acting chairwoman Rebecca Kelly Slaughter  and commissioner Noah Joshua Phillips that “preying on workers justifies punitive measures far beyond the restitution provided here and I believe the FTC should act now to deploy dormant authorities to trigger civil penalties and other relief in cases like this one.”

“Companies should succeed only when they compete, not when they cheat or abuse their power,” Chopra added. “While is one of the largest, most powerful and most feared firms in the world, the company cannot be above the law. Regulators and enforcers in the United States and around the globe can no longer turn a blind eye.”