Amazon agrees to pay $3.95 million to settle a lawsuit over misleading tipping practices for delivery drivers, raising questions about corporate transparency and worker compensation.
They’re not technically admitting to it, but they also kind of are.
At a Glance
- Amazon settles lawsuit for $3.95 million over allegations of misleading tipping practices for Flex drivers
- Company accused of using customer tips to reduce labor costs instead of directly paying drivers
- Settlement requires Amazon to disclose how tips are used for the next five years
- Amazon denies wrongdoing, stating practices were changed over five years ago
- Case follows a previous $61.7 million FTC settlement over similar allegations
Amazon’s Tipping Controversy Unveiled
In a significant legal development, Amazon.com, Inc. and Amazon Logistics, Inc. have agreed to pay $3.95 million to settle a lawsuit filed by the District of Columbia. The suit alleged that the e-commerce giant misled customers about how tips for Amazon Flex delivery drivers were managed. This settlement brings to light questionable practices that occurred between late 2016 and August 2019, during which Amazon allegedly altered its payment structure in a way that redirected tips meant for drivers to cover the company’s wage commitments.
The lawsuit, filed under the District’s Consumer Protection Procedures Act, accused Amazon of deceptive trade practices. It claimed that while the company assured customers that 100% of tips would go to drivers, it was actually using these funds to reduce its labor costs and increase profits. This practice affected drivers working for Amazon Flex, a program launched in 2015 that allows independent contractors to deliver packages and earn tips.
The $3.95 million settlement includes $2.45 million in penalties and $1.5 million for litigation costs. Beyond the financial aspect, the agreement imposes significant operational changes on Amazon. For the next five years, the company is required to provide clear disclosures about how tips are used and inform customers if tips are being used to cover wages rather than increase drivers’ earnings.
“When companies mislead customers to boost their profits by stealing tips intended for their workers, they are cheating their consumers, their employees, and their competitors who play by the rules. It’s not sufficient, after being caught, to simply give back the ill-gotten gains. Rather, there must be meaningful consequences to deter misconduct from happening in the first place. Especially when living expenses are harder and harder to afford, my office will continue to ensure that hardworking District residents receive every penny of their earnings and consumers have confidence that they are not being misled,” Attorney General Brian L. Schwalb said.
This settlement follows a separate resolution with the Federal Trade Commission (FTC) in which Amazon was ordered to reimburse drivers for withheld tips. The FTC alleged that Amazon began skimming tips in late 2016, implementing a variable-pay system without properly notifying customers or drivers. Under this system, Amazon reportedly reduced its base pay contribution when customers tipped, effectively pocketing the tips.
Despite the settlement, Amazon has not admitted to any wrongdoing. The company maintains that the practices in question were changed over five years ago. Amazon spokesperson Steve Kelly stated, “Like any successful program, Amazon Flex has evolved over time, and this lawsuit relates to a practice we changed more than five years ago.”
If they didn’t do it…why are they paying?
