FTC finds Amazon took Flex delivery drivers’ tips

Amazon will pay $61.7 million to settle a U.S. Federal Trade Commission finding that the company withheld tips meant for Flex delivery drivers for more than two years.

Despite pledging to drivers and shoppers that Flex drivers would receive 100 percent of the value of tips, the world’s largest online retailer used a portion of the gratuities to pay the basic hourly rate for the on-demand package delivery program, the regulator said on Tuesday.

“The conduct alleged in the complaint is outrageous,” FTC Acting Chairwoman Rebecca Kelly Slaughter and Commissioner Noah Phillips said in a statement. Platform companies that operate in the gig economy, they said, “must treat their workers fairly and non-deceptively.”

Flex, launched in 2015, invites independent contractors to deliver packages from their own vehicles. Amazon promised drivers a pay rate of $18 to $25 an hour and the full value of their tips.

But in late 2016, the company started paying drivers a lower rate and using the tips to make up the difference. Amazon didn’t disclose the change to drivers, the FTC said, and the tips it took from drivers amounted to $61.7 million.

After drivers began wondering why their overall pay had decreased, hundreds complained to the company, according to the FTC, which said employees described Amazon’s handling of the change as a “reputation tinderbox” and “huge PR risk.”

Amazon diverted almost a third of customer tips to driver wages, stopping the practice only after becoming aware of the FTC probe in August 2019, the agency said. Under the terms of the settlement, the FTC will use the $61.7 million to compensate drivers who lost tips. Drivers can sign up for email updates on the refund process at the FTC’s website.

Seattle-based Amazon.com Inc. said in a statement that the way it reported pay to workers was clear. But the company said it “added additional clarity in 2019” and is “pleased to put this matter behind us.”

The FTC said the money Amazon is paying for the settlement will go back to delivery drivers whose tips were taken.

Under the settlement, Amazon will be prohibited from misrepresenting to drivers details about their pay rate and tips.