Shubham Saroj
Amazon has agreed to pay a fine of almost $62 million to settle Federal Trade Commission (FTC) charges that the e-commerce giant skimmed off customer tips to subsidize delivery drivers’ hourly wages. “The FTC is sanctioning Amazon.com for expanding its business empire by cheating its workers,” FTC commissioner Rohit Chopra wrote in a statement. “In total, Amazon stole nearly 1/3rd of driver’s tips to pad its own bottom line.”
Under the Amazon Flex program, which launched in 2015, independent contractors use their own cars to deliver Amazon packages and Amazon Fresh and Whole Foods groceries. The FTC alleges that Amazon lured in recruits for the Flex program by promising they would receive a base hourly wage between $18 and $25, as well as 100% of tips left by customers in the app.
But between late 2016 and August 2019, Amazon allegedly lowered its hourly rate and started using tips to make up the difference without informing drivers. An L.A. Times investigation found that while most Flex drivers were being paid the promised base wage, all that money wasn’t coming from Amazon, but out of drivers’ own tips.
The Times report noted that Amazon used an opaque payout system that didn’t show the breakdown of the drivers’ money, only their total earnings. “In one case, a driver who was assigned to deliver an order to his own home tipped himself $12. The guaranteed minimum base pay for the order was $27. The driver received $30 in compensation for the order, which the company said included 100% of the tip — showing that Amazon contributed only $18,”.
Even after drivers started to complain and the media began reporting on the tip pocketing, according to the FTC, the company took steps to “obscure” what was going on, telling drivers that they were still receiving 100 percent of tips, even while Amazon employees privately referred to the situation as an “Amazon reputation tinderbox” and “a huge PR risk to Amazon.”
The company allegedly only stopped this new pricing model when the FTC informed Amazon that it was investigating Flex pay practices. The $61.7 million represents the total amount that Amazon allegedly withheld from Amazon Flex drivers, and will be used to compensate those workers. Drivers who think they may have been impacted should sign up for FTC email updates.
Amazon isn’t the first company to come under scrutiny for stealing employee tips—DoorDash, which paid a $2.5 million settlement last year, and Instacart have both been accused of similar practices. But Amazon has long been accused of prioritizing efficiency and profits over employee welfare and pay.
Last year, Amazon warehouses reportedly became a hotbed for coronavirus spread, with overworked employees falling ill and dying. Amazon has launched an aggressive anti-union campaign over employee attempts to unionize for better wages and improved working conditions at one warehouse in Alabama.
Now Jeff Bezos has also decided to step down as the CEO and it would be exciting to see what the future holds for the world’s biggest online shop.
