Amazon’s Covert Operation Revealed: Skimming Drivers’ Tips
The District of Columbia Attorney General, Brian L. Schwalb, disclosed on Friday that Amazon has agreed to shell out close to $4 million to settle allegations that the e-commerce giant was using the tips received by its delivery drivers to offset labor costs. This settlement comes on the heels of a previous $61.7 million payout made by Amazon to the Federal Trade Commission (FTC) to resolve similar accusations.
In 2022, the DC attorney general’s office filed a lawsuit claiming that Amazon had breached the District’s consumer protection laws by deceiving residents regarding the utilization of digitally paid tips. The lawsuit specifically targeted drivers in Amazon’s Flex business, a service that enables individuals to deliver Amazon packages using their personal vehicles.
According to the lawsuit, Amazon initially assured customers that all tips added during the checkout process for Amazon Flex orders would be given to the drivers. However, both the District and the FTC alleged that Amazon altered its payment structure in late 2016 without notifying either customers or drivers, resulting in reduced costs for the company.
The FTC’s previous complaint asserted that Amazon adjusted its driver wages using algorithmic calculations based on average tip amounts in various regions. The tips were then utilized to bridge the gap between the new base pay and the promised hourly rate of $18-25 for drivers.
Amazon reportedly ceased the practice of diverting tips in 2019, coinciding with the commencement of the FTC’s investigation into the matter. Despite the settlement announced on Friday, Amazon has refuted the accusations and has not admitted to any misconduct.
In line with the settlement agreement, Amazon is obligated to pay $2.45 million in penalties along with $1.5 million towards legal fees. Additionally, the company must provide transparency on its platform by disclosing how tips contribute to driver earnings.
