Above photo: Amazon will pay Flex drivers to settle a complaint by the Federal Trade Commission that the company failed to pay drivers their full tips. Michel Spingler / Associated Press.
Amazon will pay more than $61.7 million to Flex drivers from whom it withheld the full amount of customer tips to settle a Federal Trade Commission investigation.
The settlement comes nearly two years after the Los Angeles Times first exposed that Amazon was dipping into customer tips to cover the base pay guaranteed to Flex drivers, who deliver Amazon Fresh, Prime Now and other orders.
The money will reimburse Flex drivers whose tips Amazon withheld over the last 2½ years, according to the FTC.
Until August 2019, Amazon promised Flex drivers a guaranteed minimum base pay for each order, which the e-commerce company said included 100% of customer tips. However, as The Times reported, Amazon would at times use tips to subsidize the company’s own payment to workers. In one case, a driver who was assigned to deliver an order to his own home tipped himself $12. The guaranteed minimum base pay for the order was $27. The driver received $30 in compensation for the order, which the company said included 100% of the tip — showing that Amazon contributed only $18.
In May 2019, a few months after the pay model was revealed, the FTC notified Amazon that it was launching an investigation and sought records regarding its payment policies for Flex drivers. According to the complaint, Amazon changed its tip-dipping practice after learning it was under investigation by the FTC. In August 2019, Amazon sent an email to drivers indicating that it would no longer use tips to subsidize the base pay and that the company would give a full breakdown of how much workers were being paid for each order.
In addition to the $61.7-million settlement, Amazon will be prohibited from making changes to how drivers receive customer tips without getting drivers’ written consent and from misrepresenting driver pay or tips. The FTC has asked Amazon Flex drivers to sign up to receive email updates on the status of the refund process.
“Today’s order provides substantial redress to the families victimized by Amazon’s anticompetitive deception,” FTC Commissioner Rohit Chopra wrote in a statement. “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.”
In a statement, Amazon spokeswoman Deborah Bass disputed that the company’s policies misled drivers.
“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,” Bass said. “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.”
Johana Bhuiyan is a business reporter at the Los Angeles Times covering the technology industry with a focus on accountability.