Amazon will pay $ 61.7 million in a settlement with the Federal Trade Commission (FTC) over allegations that the company used customer tips to subsidize the guaranteed hourly wage of some delivery managers, after recruiting the gig workers with promises of $ 18 to $ 25 hourly wage plus all customer tips. The FTC has said the entire settlement is destined for affected drivers, but the agency has not yet provided details on how drivers can recover their tips.
The investigation and settlement obtained by the FTC is a major milestone in the wake of years of calls by working groups and some politicians to eradicate abuse of gig workers. To highlight this moment, two of the four current FTC commissioners are also appealing to Congress to give the agency the ability to issue civil fines to first-time offenders like Amazon to further deter companies from misleading workers and consumers.
Under a delivery program called Amazon Flex, Amazon hires independent contractors to handle deliveries of Prime Now and Amazon Fresh orders, and sometimes Amazon.com packages as well. From 2015 to 2016, the company paid these drivers $ 18 to $ 25 per hour, plus customer tips. But the FTC claims that Amazon changed its payment practices in a cunning way at the end of 2016 and started packing some customer tips to subsidize the company’s payments from $ 18 to $ 25 per hour, while assuring executives that they still receive all their tips.
“At the end of 2016, the FTC claims, Amazon shifted from the paid driver the promised rate of $ 18-25 per hour plus the full amount of customer tips to paying a lower hourly rate for drivers, a shift it did not to drivers. Amazon used the tips from customers to make up the difference between the new lower hourly rate and the promised rate. As a result, executives were short of more than $ 61.7 million in tips. ”
To make matters worse, the FTC claims that Amazon “then did not notify managers of the changes to its payment plan and even took steps to make the changes unclear to managers.”
Amazon said in a statement that they do not agree “that the historical way in which we paid the drivers is unclear”, but are “happy to put this matter behind us.”
In a call with reporters, FTC officials said the $ 61.7 million is the full amount owed to drivers, but said it could take weeks or months for drivers to figure out how to recover their tips. An FTC spokesman said Amazon Flex executives who think they have been affected should sign up here for email updates. The settlement also prohibits Amazon from misrepresenting the manager’s earnings and tips, and requires the manager to notify managers before making any future changes to the way tips are handled.
The Los Angeles Times first exposed Amazon’s tip-pocket scheme at the beginning of 2019, but the FTC says Amazon continued the practice until the commission notified the company of its investigation later that year. The newspaper’s report follows BuzzFeed News’ coverage of similar tips for delivery company DoorDash and Instacart. Both companies eventually reversed their practices.
In a joint statement Tuesday, FTC acting commissioner Rebecca Slaughter, a Democrat, and Republican Noah Phillips, a Republican, called on Congress to give the FTC the power to regulate gig economics. to state more clearly what kind of behavior is illegal. The couple also demanded that Congress allow the FTC to issue large civil fines to businesses that offend for the first time, as a further deterrent to the use of schemes such as Amazon, which FTC commissioners called ‘outrageous’. . Amazon will only open itself to such civil punishment if it violates the terms of this settlement.
Slaughter said the FTC would create the power to impose fines for first-time offenses a powerful “one-two-stroke,” along with the agency’s ability to recover lost wages for workers.