Starting today, the Federal Trade Commission will start doing something Amazon failed to do for around 140,000 of its Flex delivery drivers: pay them their tips.
In total, the FTC announced it will send nearly $60 million worth of withheld tips to drivers as part of a settlement with Amazon that was reached earlier this year. Drivers will receive an average payout of $422, with one driver set to receive more than $28,000. Nearly 20,000 of the drivers are expected to receive payments in excess of $600. The funds themselves are set to appear by way of 139,507 checks and 1,621 PayPal payments, according to the FTC.
The agency first launched its investigation into Amazon’s Flex practices in 2019 before filing a lawsuit alleging the company had withheld $61.7 million in tips from drivers between 2016 and 2019. The FTC’s suit claims Amazon lowered the hourly rate for its Flex drivers in late 2016 and used customer tips to make up the difference, all without disclosing the changes to drivers. Amazon had guaranteed its drivers they would receive 100% of their tips which clearly didn’t happen.
In its initial complaint, The FTC said Amazon “used tens of millions of dollars in customer tips to subsidize its payments to drivers,” and “continued to divert drivers’ tips during this time despite hundreds of driver complaints about the practice, critical media reports, and internal recognition that its conduct was a ‘reputation tinderbox.’”
In addition to relinquishing the $61.7 million in withheld tips, the FTC settlement prohibits Amazon from misrepresenting a driver’s likely rate of pay and requires transparency around how much of their tips they should expect to earn.
Of course, Amazon isn’t the only company guilty of shady tipping practices. Food delivery service company DoorDash has previously used customer tips to make up for shortfalls in the base pay it promised its drivers. Instacart was also pressured to change its tip practices last year after lawmakers questioned the app’s propensity for “tip baiting.” Uber, meanwhile, didn’t even offer tipping until 2017 (though according to one 2019 study, only around 16% of Uber rides actually receive tips).
Though lawmakers are busy proposing hefty antitrust legislation that would, in theory, radically alter the way large firms are regulated and scrutinized in the US, the Amazon Flex settlement is a reminder of what’s still possible using rules and regulations currently on the books.
Update 11/4/21: In a statement sent to Gizmodo after publication, an Amazon spokesperson said:
While we disagree that the historical way we reported pay to drivers was unclear, we added additional clarity in 2019 and are pleased to put this matter behind us. Amazon Flex delivery partners play an important role in serving customers every day, which is why they earn among the best in the industry at over $25 per hour on average across the country.