On Tuesday, the Federal Trade Commission announced it is fining Amazon almost $62 million for withholding the full amount of customer tips from its Flex delivery drivers. “In total, Amazon stole nearly one-third of drivers’ tips to pad its own bottom line,” Commissioner Rohit Chopra said in a statement. The settlement will reimburse the drivers whose money was withheld by Amazon over the course of two and a half years, the FTC said. It’s not clear how many drivers were affected.
Amazon formed Flex in 2015 to have drivers—who are contractors, not employees—pick up and deliver Amazon Fresh, Prime Now, and other orders with their own cars. Dubbed “Uber for packages,” Flex was an attractive gig economy position, mainly because it pledged a high base pay of $18 to $25 per hours, plus 100 percent of customer tips.
But in February 2019, 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,” the Times reported.
The then FTC launched an investigation into Amazon, which triggered the company to alter its practices without acknowledging wrongdoing or returning the pay. In August 2019, Amazon announced it would provide drivers with a breakdown of their earnings and cover at least $15 of minimum pay, and it confirmed that drivers would receive 100 percent of their tips in addition to their base pay. Or basically, as the the Verge noted, Amazon said it would use tips in the “the almost universally understood intent of how tips should work in the first place.”
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.
Shortly after the FTC statement, Amazon founder Jeff Bezos announced plans to step down as CEO this summer, citing a decision to focus on philanthropy, Blue Origin, the Washington Post, and “other passions.” Andy Jassy—the CEO of Amazon Web Services—will replace Bezos, who will remain with the company as executive chairman.