Amazon ordered to pay $61.7m fine for withholding drivers’ tips

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Amazon will pay more than $61.7m to settle charges brought against it by the Federal Trade Commission alleging it failed to pay Amazon Flex drivers the full tip amounts they were given by customers of the company. 

According to an FTC complaint, Amazon only stopped taking the contracted drivers' tips after becoming aware of the FTC investigation.  

The money collected from Amazon will go toward drivers' compensation.  

The company claimed drivers would receive "100 per cent of the tips you earn while delivering with Amazon Flex" but later changed the way it paid drivers - without alerting them - and pocketed their wages.

“Rather than passing along 100 percent of customers’ tips to drivers, as it had promised to do, Amazon used the money itself,” Daniel Kaufman, Acting Director of the FTC’s Bureau of Consumer Protection, said. “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.”

A spokesperson for Amazon offered a statement on the settlement.

“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. 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,” the spokesperson said. 

Amazon Flex is a service that hires delivery drivers as independent contracts who use their own vehicles to deliver packages. Much like Uber and Grubhub, the drivers are hired as independent contractors, freeing the company from having to provide health insurance, paid vacations, scheduled pay increases, or vehicle maintenance and upkeep.  

In 2016, Amazon dropped the rates it was paying drivers - which it promised would be between $18 and 25 per hour - and allowed customers tips to make up the difference.

The drivers should have received their full, promised wages as well as the tips.  

Drivers sent hundreds of complaints to Amazon after they realized their earnings had decreased. In response, Amazon sent form letters promising drivers they would continue to receive "100 per cent of their tips."  

The new pricing model was covered in media reports and continued to face scrutiny from drivers, but Amazon continued using it until 2019, when it became aware that the FTC was investigating the complaints.  

Under Amazon's settlement with the FTC, the company will have to pay the $61.7m, and it is barred from further misrepresenting payment models and expectations to its employees. The company also cannot change the pay of its drivers without first gaining their express informed consent.