Amazon ordered to pay back $61.7m after pocketing delivery drivers’ tips

The US Federal Trade Commission has forced Amazon to pay out $61.7m to some of its delivery drivers to settle allegations that the ecommerce giant had pocketed tips left by their customers.

The FTC said Amazon, whose revenues are expected to have exceeded $380bn in 2020, withheld the amount over the course of two-and-a-half years, only stopping once it discovered it was under investigation.

The issue concerned workers who delivered packages via Amazon’s Flex programme, an Uber-like gig economy service where workers are paid per “block”, usually lasting about three or four hours.

Like other gig platforms, Flex drivers use their own vehicles and are responsible for their own expenses. Many Flex workers are used to fulfil same-day grocery orders through Prime Now or Amazon Fresh, for which customers can leave a tip via Amazon’s app.

The FTC said that according to Amazon’s advertising, Flex drivers should “receive 100% of the tips you earn”, in addition to a minimum of $18 to $25 in earnings per hour.

But beginning in 2016, the FTC alleged, Amazon started using customer tips to make up the minimum earnings, without notifying workers of the change. The practice ended in 2019, the FTC said.

“Rather than passing along 100 per cent 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 on Tuesday.

“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 has not disclosed the number of Flex drivers operating on its network, but analysts believe the company has increasingly leaned on the casual workforce as it seeks to handle elevated pandemic demand.

“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,” said Amazon.

“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.”

In a call with reporters, FTC acting chair Rebecca Kelly Slaughter said the commission was “eagerly soliciting” evidence of foul play across all gig platforms, and called on Congress to give it greater powers to punish companies that misrepresented earnings.

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