Amazon will pay $61.7 million to settle charges of withholding tips from delivery drivers

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Amazon will pay $61.7 million to settle charges of withholding tips from delivery drivers
The settlement will be used to pay back drivers who lost tips.Pascal Rossignol/Reuters
  • Amazon will pay nearly $62 million to settle federal charges that it withheld tips from delivery drivers.
  • The Federal Trade Commission said Amazon didn't pay 100% of customer tips to drivers, as it had promised.
  • "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 told Insider on Tuesday.

Amazon will pay more than $61.7 million to settle charges that it consistently withheld tips from delivery drivers over a two-and-a-half-year period, the Federal Trade Commission said Tuesday.

According to the FTC, Amazon advertised that drivers who enrolled in the Amazon Flex program would make $18-$25 per hour, and that they would keep 100% of customer tips. Amazon also told customers that all the money they tipped would reach drivers.

However, an FTC investigation found that Amazon wasn't keeping up its end of the bargain.

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"Rather than passing along 100 percent 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. "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."

The Amazon Flex program lets independent contractors fulfill AmazonFresh and Prime Now deliveries using their personal vehicles, similar to systems at businesses like DoorDash and Uber Eats.

Read more: Inside the 'Chop': Amazon Web Services CEO Andy Jassy uses a Seattle conference room to cut down big ideas - and unprepared employees

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The agency alleges that in late 2016, Amazon lowered the hourly rate it paid drivers and used customer tips to make up the difference. Amazon didn't notify drivers of the change, the FTC said.

"The FTC alleges that the company then intentionally failed to notify drivers of the changes to its pay plan and even took steps to make the changes obscure to drivers," the agency said in a press release. "After making the change, the company continued to promise drivers and customers that 100 percent of tips would be passed through to drivers."

Amazon, for its part, disputes that it ever sought to misrepresent how much it was paying Flex drivers.

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"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," a spokesperson told Insider on Tuesday. "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 FTC will use the $61,710,583 sum to pay back Flex drivers. As part of the settlement, Amazon will be barred from misrepresenting driver pay or customer tips.

Last month, a lawsuit filed in a federal district court in New York accused Amazon of fixing its e-book prices. Several advocacy groups also sent a letter to the FTC in January calling for regulators to investigate whether Amazon makes it too difficult to cancel Prime subscriptions.

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In November, DoorDash paid $2.5 million to settle charges that it withheld tips from delivery contractors.

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