Amazon Agrees to Pay Nearly $4 Million to Settle Charges Over Tip Subsidy Practices
Amazon has agreed to pay nearly $4 million to settle charges that the e-commerce company subsidized its labor costs by taking tips from delivery drivers, District of Columbia Attorney General Brian L. Schwalb said Friday.
The settlement came four years after Amazon paid $61.7 million to resolve a complaint brought over similar accusations by the Federal Trade Commission (FTC).
Background on the Issue
In 2015, Amazon launched its Flex business program, which allows people to deliver Amazon packages using their own cars.
The company represented to consumers that all tips added during checkout for Amazon Flex orders would go directly to drivers.
However, both the District of Columbia and the FTC alleged that Amazon changed its payment model in late 2016 to lower its costs without disclosing the switch to customers or drivers.
The Allegations
The FTC's previous complaint alleged that Amazon reduced its own wages for drivers using data collected about average tips in a specific area.
Amazon then used the tips to make up the difference between its new base pay and the $18-25 per hour it had promised drivers, according to the complaint.
The Settlement
Under the terms of the settlement, Amazon will pay $2.45 million in penalties plus $1.5 million in legal fees.
The company must also disclose on its website and app how tips impact driver earnings.
Amazon's Response
Amazon has denied the allegations and did not admit to wrongdoing as part of the settlement announced Friday.
"Like any successful program, Amazon Flex has evolved over time, and this lawsuit relates to a practice we changed more than five years ago," said Amazon spokesperson Steve Kelly in a statement.
Implications for Drivers
The settlement may have implications for drivers who participated in Amazon's Flex program during the relevant period.
However, it is unclear at this time what specific actions drivers can take or how they might be affected by the settlement.
Conclusion
The settlement marks another significant development in Amazon's ongoing efforts to address concerns over its labor practices.
The company has faced scrutiny from regulators and lawmakers on a range of issues, including worker classification, pay, and benefits.
- Amazon will pay $2.45 million in penalties.
- The company must also disclose how tips impact driver earnings.
- Amazon denied the allegations as part of the settlement.