Today, the Federal Trade Commission announced it’s settling charges it levied against Amazon alleging the company had skimmed $61.7 million in tips from its contractor delivery drivers. The fine, fittingly, is for the full amount and “will be used by the FTC to compensate drivers.” You love to see it.
As a refresher, Amazon Flex launched back in 2015. The draw was that Flex drivers could use their own vehicles to deliver products ordered from various services, including Amazon Fresh and Prime Now, while earning an advertised rate of $18-$25 per hour. For certain deliveries, customers could also tip their drivers. From the get-go, Amazon promised both customers and drivers that 100% of the tips would go to drivers.
In reality, starting in late 2016, the FTC alleges that Amazon shifted Flex drivers to a lower hourly rate and then used customer tips to make up the difference. This would’ve been one thing if Amazon had then disclosed the change to the drivers and customers. But, according to the FTC, Amazon not only failed to notify drivers, it intentionally took steps to hide the change from drivers themselves while promising everyone that yes, drivers were still receiving 100% of the tips.
In the FTC’s initial complaint, it notes that Amazon employees were aware this was a colossal mistake, internally characterizing the move as an “Amazon reputation tinderbox” and a “huge PR risk.” Nothing changed until August 2019, when the FTC alleges Amazon became aware of its investigation. Given that DoorDash was also embroiled in a tip-skimming scandal, it’s possible that Amazon thought it was a good idea to go back to the old model, where drivers were paid what they were promised. At that time, Amazon confirmed to Gizmodo that it would no longer use customer tips to pad out wages and changed the Flex app to include a breakdown of earnings for drivers.
In total, Amazon will have to cough up $61,710,583 which the FTC says is the full amount that it believes Amazon stole from drivers. As for where that money is going, the FTC says it’ll be used to refund Flex drivers. (Drivers can sign up for email updates on the refund process here.) On top of repaying drivers, the FTC says Amazon will be barred from misrepresenting drivers’ wages, i.e. what the expected pay will be, how much of order tips they’re entitled to, and what portion of a customer’s payment is derived from a tip. The company is also prohibited from using tips to pad wages unless it first informs drivers of the change and obtains their consent.
Well, just goes to show: Don’t steal tips. Also, don’t lie about stealing tips. Just don’t be a dick, in general. But, this being Amazon, I’m sure this unfortunately isn’t the last labor violation we’ll hear about.
Update, 2/04/2021, 5:55pm: After initial publication, an Amazon spokesperson provided Gizmodo the following statement:
“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.”