Amazon will pay $61.7 million to settle claims it withheld tips from delivery workers

Contractors working for the Amazon Inc. Flex program load packages into vehicles to deliver to customers in San Francisco.

David Paul Morris | Bloomberg | Getty Images

Amazon will pay $61.7 million to settle allegations by the Federal Trade Commission that it failed to pay Flex delivery drivers the full amount of tips received from customers.

The settlement, announced Tuesday, was passed in a unanimous vote by the commissioners. Amazon spokesperson Rena Lunak told CNBC in a statement that the company disagrees with the FTC’s claim that the pay model for drivers was unclear.

“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,” Lunak said. “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.”

“Rather than passing along 100% of customers’ tips to drivers, as it had promised to do, Amazon used the money itself,” said Daniel Kaufman, acting director of the FTC’s Bureau of Consumer Protection, in a statement. “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.”

Amazon Flex operates similarly to Uber, in that contracted delivery drivers pick up shifts on demand to deliver Amazon packages or Whole Foods orders to customers’ doorsteps. The service, launched in 2015, uses drivers to deliver packages from their own vehicles and operates in more than 50 cities across the U.S.

As part of the settlement, Amazon is required to pay more than $61.7 million to the FTC, which will be used by the agency to compensate Flex drivers. The settlement also prohibits Amazon 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 settlement comes as on-demand delivery services DoorDash and Instacart have also attracted public scrutiny for their tipping practices.

Last November, DoorDash reached a $2.5 million settlement with the attorney general of the District of Columbia over claims it misled consumers and pocketed workers’ tips. AG Karl Racine announced charges against DoorDash after his office found the company used customers’ tips to offset the minimum payment owed to workers. DoorDash said in 2019 it had changed its tipping model.

Similarly, Racine in August of last year filed a lawsuit against Instacart, claiming the company deceived customers into thinking an optional service fee would be collected as a tip for workers and pocketed it for itself instead.

This story is developing.

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