Amazon to pay $61.7M to settle FTC charges it withheld tips from Flex drivers

The e-commerce giant is paying up over charges it did not pay out customer tips to drivers for Amazon Prime Now and Fresh.

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Drivers for Amazon Prime Now and Fresh may have had some tips withheld by the e-commerce giant. 

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Amazon will pay more than $61.7 million to settle Federal Trade Commission charges that it didn't pay its Amazon Flex drivers the full amount of tips owed to them, the agency said on Tuesday. The FTC says that money represents the "full amount that Amazon allegedly withheld from drivers" over a two-and-a-half-year period. The government agency says that Amazon "stopped its behavior only after becoming aware of the FTC's investigation in 2019." 

The FTC said it'll distribute the funds to "compensate drivers," and those impacted can sign up for updates from the agency

Per the FTC's complaint against Amazon and its Amazon Logistics subsidiary, the e-commerce giant "regularly advertised that drivers participating in the Flex program would be paid $18-25 per hour for their work making deliveries to customers" and also told drivers that they would "receive 100% of the tips you earn while delivering with Amazon Flex."

Amazon Flex drivers deliver products for the company's Prime Now and Fresh services. In addition to telling drivers that they would receive 100% of their tips, the FTC says that "Amazon also assured its customers that 100% of any tips they paid would go to the driver."

In late 2016 Amazon moved away from the $18-$25 hourly rate plus tips to a lower rate, according to the FTC release, and did not tell drivers of the change. The FTC alleges that Amazon then "used the customer tips to make up the difference between the new lower hourly rate and the promised rate," which led to drivers "being shorted more than $61.7 million in tips."

The FTC says that Amazon stopped using that model in August 2019 "after the company received notice of the FTC's investigation." It then returned to a model where drivers get an "identified" base pay "plus 100% of tips."

"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," an Amazon spokesperson said in a statement. "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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As part of the settlement, the FTC says Amazon will pay $61,710,583 and is prohibited from "misrepresenting any driver's likely income or rate of pay, how much of their tips will be paid to them, as well as whether the amount paid by a customer is a tip." The company also will need a driver's "express informed consent" if it wants to change the structure to using driver tips as part of compensation.

On a single day last year, Amazon CEO Jeff Bezos added $13 billion to his net worth. He has since been overtaken as the world's richest man by Tesla CEO Elon Musk.