Amazon To Pay $61.7 Million To Drivers After Stealing Tips

Amazon To Pay $61.7 Million To Drivers After Stealing Tips

tips as base pay
A bike messenger rides past boxes of Amazon Fresh deliveries in New York on June 16, 2019. Amazon was ordered to settle an FTC investigation over using tips toward guaranteed driver base pay. (AP Photo/Jenny Kane)

Until August 2019, Amazon promised to pay drivers a guaranteed minimum base pay but sometimes used tips owed to the workers to subsidize its own payments, withholding the full amount of customer tips they had earned.

The e-commerce giant, which has a market capitalization of $1.694 trillion, has agreed to pay more than $61.7 million to drivers of its Flex courier service to settle a Federal Trade Commission investigation.

“In total, Amazon stole nearly one-third of drivers’ tips to pad its own bottom line,” FTC Commissioner Rohit Chopra said in a statement.  The settlement will reimburse the drivers whose money was withheld by Amazon over the course of two-and-a-half years, the FTC said. It’s not clear how many drivers were affected, Slate reported.

The settlement comes about two years after a Los Angeles Times investigation revealed that Amazon was dipping into customer tips to cover the base pay guaranteed to drivers who deliver Amazon Fresh, Prime Now and other orders.

Amazon started Flex in 2015 with drivers who are contractors, not employees, and used their own cars. Dubbed “Uber for packages,” Flex was attractive in the gig economy, mainly because it promised a high base pay of $18 to $25 per hour plus 100 percent of customer tips, Slate reported.

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One Flex driver was assigned to deliver an order to his own home and 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 percent of the tip — showing that Amazon contributed only $18, LA Times reported.

After Amazon learned it was being investigated by the FTC, it sent an email to drivers in August 2019 saying it would stop using tips to subsidize base pay and would provide drivers with a full breakdown of how much workers were being paid per order.

In addition to the $61.7-million settlement, Amazon is prohibited from changing the way drivers receive customer tips without drivers’ written consent and from misrepresenting driver pay or tips. 

Amazon founder and CEO Jeff Bezos, the richest man in the world, has a net worth of $196 billion as of Feb. 3, 2021, Forbes reported. Bezos founded Amazon in 1994 in his garage in Seattle. Electric carmaker Elon Musk bypassed Bezos in January to become the world’s richest, but as of Feb. 3, Forbes pegs Musk’s net worth as $185.4 billion, putting the Tesla founder in second place.

Flex delivery partners earn more than $25 per hour on average — among the best earnings in the industry — according to Amazon spokeswoman Deborah Bass.

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In 2020, overworked Amazon warehouse employees were getting sick and dying from coronavirus, prompting protests for improved working conditions. Amazon launched an anti-union campaign against employee efforts to unionize for better wages.

“Amazon has long been accused of prioritizing efficiency and profits over employee welfare and pay,” Slate reported. However, it isn’t the first company to be investigated for stealing employee tips. DoorDash paid a $2.5 million settlement in 2020, and Instacart has also been accused of cheating employees.

The FTC settlement order “provides substantial redress to the families victimized by Amazon’s anticompetitive deception,” Chopra said 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.”