Amazon has agreed to settle an administrative complaint brought by the Federal Trade Commission in February 2021, alleging the company failed to pay Amazon Flex drivers 100% of tips from customers over a two-and-a-half-year period. Amazon has agreed to pay $61.7 million to settle the claim that alleges Amazon regularly advertised that Flex drivers would get paid $18 to $25 an hour for deliveries, plus tips for Prime Now and Amazon Fresh deliveries.
Amazon also told customers that 100% of their tips would go directly to drivers, but the company didn’t follow through on that promise. Instead, Amazon used the tips to subsidize drivers’ pay, effectively lowering their overall compensation. As a result, hundreds of drivers complained.
“Rather than passing along 100 percent of customers’ tips to drivers, as it had promised to do, Amazon used the money itself,” said Daniel Kaufman, Acting Director of the FTC’s Bureau of Consumer Protection, in a February 2, 2021 news release. “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.”
Terms of settlement
The final administrative consent order approved by the FTC states that:
- Amazon must pay $61,710,583 to compensate drivers for tips withheld.
- Amazon will be prohibited from misrepresenting any driver’s income or rate of pay, how much of the tips they will receive, and whether payments include customer tips.
- Amazon is prohibited from changing how driver’s tips are used as compensation without first getting the driver’s express informed consent.
- Amazon must follow the final order for 20 years and will be liable for civil penalties of up to $43,792 per violation if they fail to meet its terms.
The FTC approved the final consent order in a vote of 4 to 0.
Who is eligible to receive compensation?
Amazon Flex drivers who drove for Amazon between late 2016 and August 2019 may have had their tips impacted and, if so, they are eligible for payment. Flex drivers are those who delivered goods like household and official essentials and groceries through Amazon’s Prime Now and Amazon Fresh programs.
What’s next?
Amazon will provide the FTC with information on which Amazon Flex drivers were impacted. The FTC’s Office of claims and Refunds will distribute funds accordingly. Drivers are not required to take any action to receive a payment, but they can sign up to get email updates about the settlement. The settlement will be considered final after the end of a 30-day public comment period. Affected drivers should get payments within six months after the comment period. The FTC will post updates to its website and blog and distribute a press release when payments are due to go out.
Insider Take
Amazon Flex drivers will finally get the money owed them – compensation they should have received from their employer between three and five years ago. It is disappointing that it took hundreds of driver complaints and FTC action for Amazon to follow through on its commitment to drivers. Without their drivers, Amazon wouldn’t be able to get their millions of products to customers. They should be treated fairly, and customers who want to tip their delivery drivers should feel confident knowing their tips are being used as intended. A $61.7M settlement is just a slap on the wrist to Amazon, but we hope it is a signal to them and other companies that they will eventually get caught for deceptive business practices.
