Contractors working for Amazon Inc. Flex program works, loads packages into vehicles to deliver to customers in San Francisco.
David Paul Morris | Bloomberg | Getty Images
Amazon will pay $ 61.7 million to settle the Federal Trade Commission’s allegations that it did not pay the Flex delivery managers the full amount of tips received from customers.
The commission voted 4-0 in favor of the settlement, which was announced on Tuesday. In the complaint, the FTC claims that in 2016 Amazon shifted from the paid driver the promised rate of $ 18 to $ 25 per hour, plus tips, to the management of a lower hourly rate.
Amazon, according to the FTC, ‘intentionally’ failed to notify drivers of this change and used the tips to make up the difference between the promised rate and the new lower hourly rate.
“Instead of passing on 100% of customers’ tips to drivers, as they promised, Amazon used the money itself,” Daniel Kaufman, acting director of the FTC’s Consumer Protection Bureau, said in a statement. said. “Our actions today give the managers back the tens of millions of dollars’ worth of tips that Amazon abused, and require Amazon to get permission from managers before it will change the handling of tips in the future.”
Amazon spokeswoman Rena Lunak said in a statement to CNBC that the company did not agree with the FTC’s claim that the pay model for drivers was unclear.
“While we do not agree that the historical way in which we paid the drivers is unclear, we gave extra clarity in 2019 and are pleased that we can put this matter behind us,” Lunak said. “Amazon Flex delivery partners play an important role in customer service every day, so on average they earn more than $ 25 per hour among the best in the industry.”
Amazon Flex works similarly to Uber, in that contracted delivery managers take off shifts on demand to deliver Amazon packages or Whole Foods orders to customers’ doorsteps. The service, launched in 2015, uses drivers to deliver packages from their own vehicles and operates in more than 50 cities across the US
In its complaint, the FTC further claims that Amazon wanted to obscure the management’s change in policy, after receiving hundreds of complaints from managers who became suspicious that their overall earnings had declined.
It appears that Amazon employees recognize the risks of the way the company handled the change, referring to it as an “Amazon reputation trash” and “a major PR risk for Amazon,” the FTC said.
Amazon maintained the new pricing model until August 2019, following the launch of the FTC’s investigation. According to the FTC, the company has returned to a payment model where it pays Flex executives a base rate plus 100% of the tips.
As part of the settlement, Amazon will have to pay more than $ 61.7 million to the FTC, which will be used by the agency to compensate Flex drivers. The settlement also prohibits Amazon from misrepresenting the manager’s likely revenue or payment rate, how much of their tips will be paid to them, as well as whether the amount a customer is paying is a fee. Amazon is also prohibited from making changes to the way drivers tips are used as compensation without first getting permission from drivers.
The settlement comes because the on-demand delivery services, DoorDash and Instacart, have also launched a public inquiry into their tipping practices.
Last November, DoorDash reached a $ 2.5 million settlement with Columbia District Attorney General over allegations that it misled consumers and pocketed workers’ tips. Attorney General in Washington, DC, Karl Racine, has filed charges against DoorDash after his office found that the company uses the tips of customers to reimburse the minimum payment to workers. DoorDash said in 2019 it had changed its seesaw model.
Similarly, in August last year, Racine filed a lawsuit against Instacart, alleging that the company had misled customers into thinking that an optional service fee would be collected as a fee for workers and would rather pocket it for itself. word.