Amazon will pay $ 61.7 million in a settlement with the Federal Trade Commission (FTC) over allegations that the company has used customer tips to subsidize the guaranteed hourly wages of some delivery drivers, after recruiting the gig employees with pledges of $ 18 up to $ 25 hourly wages plus all client tips. The FTC said the entire settlement is for affected drivers, but the agency is not yet providing details on how drivers can get their tips back.
The investigation and settlement that the FTC has gathered is an important milestone in the wake of years of calls from working class groups and some politicians to combat the abuse of handyman workers. To underscore this moment, two of the FTC’s four current commissioners are also calling on Congress to allow the agency to impose civil penalties on fledgling offenders such as Amazon to further deter companies from deceiving gig- workers and consumers.
Under a delivery program called Amazon Flex, Amazon hires independent contractors to handle deliveries of Prime Now and Amazon Fresh orders, and sometimes Amazon.com packages. From 2015 to 2016, the company paid these drivers $ 18 to $ 25 an hour, plus customer tips. But the FTC alleges that Amazon secretly changed its payment habits in late 2016 and started gathering some customer tips to subsidize the company’s payments of $ 18 to $ 25 an hour, while assuring drivers that they still receive all of their tips.
At the end of 2016, the FTC claims, Amazon switched from paying drivers with the promised rate of $ 18-25 per hour plus full customer tips to paying drivers with a lower hourly rate, a shift it does not make to drivers announced. Amazon used the customer tips to make up for the difference between the new lower hourly rate and the promised rate. As a result, drivers received more than $ 61.7 million in tips. “
To make matters worse, the FTC claims that Amazon “subsequently deliberately failed to notify drivers of the changes to its payment plan, and even took steps to obscure the changes to drivers.”
Amazon said in a statement that it disagrees with “that the historical way we reported payment to drivers was unclear,” but is “pleased to have this issue behind us.”
During a phone call with reporters, FTC officials said the $ 61.7 million represents the full amount owed to drivers, but it could take weeks or months for drivers to figure out how to get their tips back. A spokesperson for the FTC said Amazon Flex drivers who believe they may be affected should sign up for email updates here. The settlement also prohibits Amazon from misrepresenting drivers’ earnings and tips, and requires the company to notify drivers before making any future changes to the way it handles tips.
The Los Angeles Times first exposed Amazon’s tip jar plan in early 2019, but the FTC says Amazon continued to do so until the commission notified the company of its investigation later that year. The paper’s report came in the wake of coverage by BuzzFeed News of similar tip-packing tactics at meal delivery company DoorDash and grocery store company Instacart. Both companies have reversed their practices.
In a joint statement on Tuesday, FTC Acting Commissioner Rebecca Slaughter, a Democrat, and Commissioner Noah Phillips, a Republican, called on Congress to give the FTC the power to create gig economy rules that more clearly explain what kind of conduct is illegal. is. The pair are also calling for Congress to give the FTC the power to impose major civil penalties on first-time violators as a further deterrent to participating in schemes such as Amazon’s, which FTC commissioners called ‘scandalous’. Amazon will only open itself to such a civil fine if it violates the terms of this settlement.
Slaughter said giving the FTC the power to issue penalties for first-time offenses would create a powerful “one-two punch” along with the agency’s existing ability to recoup lost wages for employees.