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FTC fines Amazon $61.7 million for withholding tips from Flex drivers

The fine stems from a payment policy change Amazon implemented in 2016.
Excelso Sabulau, a 35-year-old independent contract delivery driver for Amazon Flex, wears a protective mask as he carries deliveries to his car near a Whole Foods Market, as spread of the coronavirus disease (COVID-19) continues, in Dublin, California, U.S., April 6, 2020. Picture taken April 6, 2020. REUTERS/Shannon Stapleton
Shannon Stapleton / reuters
Igor Bonifacic
Igor Bonifacic|@igorbonifacic|February 2, 2021 1:34 PM

Amazon will pay a $61.7 million fine to settle allegations the company had failed to properly pay out tips to its Flex delivery drivers, the Federal Trade Commission (FTC) announced on Tuesday. The fine stems from a payment change the company implemented in late 2016. At the time, Amazon said Flex drivers, which use their own cars to deliver packages and groceries for Prime Now and Whole Foods, could earn $18 to $25 per hour, plus tips for their work. That same year, it put into place a new payment policy, which the FTC says Amazon did not properly disclose to drivers, that saw it pay Flex drivers a lower hourly rate. Over a timeframe of two-and-a-half years, it used the tips they earned to make up the difference between the rate it had promised and the one it was actually paying out. 

According to the agency, not only did Amazon “intentionally” fail to notify drivers of its policy changes, it actively took steps to obscure them as well and used the tips drivers earned. The entire time it also continued to advertise Flex drivers could earn tips and $18 to $25 per hour. The company only went back to the previous payment model after it became aware of the FTC’s investigation in 2019.

“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 for Amazon told CNBC

Amazon will pay out the $61.7 million fine to the FTC, which will use the money to compensate drivers. The agency says the fine represents the full amount of money shorted drivers between 2016 and 2019. As part of the settlement, the FTC is also prohibiting Amazon from misrepresenting how it compensates drivers in the future. The company also can’t make a change to how tips factor into someone’s compensation without first obtaining their consent. 

This is not the first time a tech company has been in the news for mishandling of tips. In 2019, it came out that DoorDash had sometimes lowered its payout to delivery workers when a customer tipped. After public backlash, DoorDash changed its earnings policy to give drivers 100 percent of all their tips.

FTC fines Amazon $61.7 million for withholding tips from Flex drivers