Amazon is set to pay millions to its Flex drivers as a settlement for accusations of stolen tips following a probe by the U.S. Federal Trade Commission.
The Verge reports that Amazon will shell out $61.7 million to drivers, a figure that equals the tips that Amazon allegedly retained during a two-and-a-half year period where Amazon Flex was using its questionable base pay system. “In total, Amazon stole nearly one-third of drivers’ tips to pad its own bottom line,” FTC commissioner Rohit Chopra said in a statement, charging Amazon with “expanding its business empire by cheating its workers.”
Amazon Flex launched its base pay system in 2017, using drivers’ tips to pay their base salaries. It became widely criticized in 2019, with Amazon advocating for the practice at first, claiming that drivers still got 100 percent of their tips, even when the tips replaced Amazon’s base pay.
According to the FTC, Amazon was able to hire a significant number of drivers by assuring them that they would have large base wages and could earn considerable tips. However, the company was apparently helping itself out by using the tips to pay the base wages, which Amazon promised would be $18 to $25. Some tips ultimately went to Amazon instead of the driver, and drivers weren’t told their tips would sometimes pay their base wages.
“Amazon received hundreds of complaints from drivers after enacting the change, as drivers became suspicious when their overall earnings decreased,” the commission said in its official statement. “Drivers who complained received form e-mails falsely claiming that Amazon was continuing to pay drivers 100 percent of tips.”
Amazon abandoned its base pay system in August 2019 after learning about the FTC’s investigation three months earlier. “By the time this scheme was exposed in late 2019, Amazon Flex was far more established,” wrote Chopra. “This conduct raises serious questions about how Amazon amassed and wielded its market power.”
DoorDash and Instacart both had instituted comparable pay systems, though neither has been the subject of an investigation. Insacart discontinued its practice in February 2019 and DoorDash followed in July 2019.
