Amazon will pay $61.7 million to settle Flex driver tip dispute with FTC

Updated: The FTC accused Amazon of withholding tips from drivers for over two years.
Written by Charlie Osborne, Contributing Writer

Amazon will pay $61.7 to settle allegations made by the FTC over failing to pay Amazon Flex drivers their tips. 

On Tuesday, the US Federal Trade Commission (FTC) said the settlement figure represents how much drivers allegedly lost in tips over a two-and-a-half-year period. 

Amazon Flex is an offshoot of the company's standard delivery infrastructure. Under Flex, drivers can sign up and use their own vehicles to deliver packages on behalf of the company, and customers are able to tip their drivers if they wish. 

According to the US watchdog, Amazon 'misrepresented' the job by telling drivers they would receive and keep all of their tips -- and also told customers that any tips awarded would go straight to the driver. 

The FTC claims that in 2016, Amazon Logistics began to pay Flex drivers a lower rate than $18 - $25 previously advertised and also covertly moved drivers to a different system that would short drivers -- as their tips would be used to bump up the hourly rate rather than be paid out separately. 

"Amazon used the customer tips to make up the difference between the new lower hourly rate and the promised rate," the agency said. "This resulted in drivers' being shorted more than $61.7 million in tips."

Amazon allegedly received "hundreds" of complaints as drivers began to become suspicious, but emails were sent to them "falsely" claimed that no changes had been made to the tip system, the FTC added. 

Furthermore, the FTC says that Amazon only "stopped its behavior" after being made aware of an investigation into the practice by the agency in 2019. The company has since returned to a pay model that provides drivers their tips in full. 

Under the terms of the settlement, the e-commerce giant will not only pay $61,710,583, but will also be prohibited from changing how it handles tips without the consent of drivers, and the company has been barred from "misrepresenting driver earnings, pay or percent of tips" paid.

The settlement will be used to return the missing tips to Flex drivers.

"Rather than passing along 100% of customers' tips to drivers, as it had promised to do, Amazon used the money itself," commented Daniel Kaufman, Acting Director of the FTC's Bureau of Consumer Protection. "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."

Earlier this week, Amazon reported Q4 revenues of $125.6 billion with $14.09 earnings per share. 

At the time of the financial earnings disclosure, Amazon founder and chief executive Jeff Bezos announced that he was stepping down from the helm and AWS chief Andy Jassy would be taking on the role of CEO in Q3 2021. 

Update 15.26 pm GMT: An Amazon spokesperson told ZDNet:

"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."

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