Amazon Pays $3.95 Million to Settle Charges of Withholding Tips from Drivers

Mei W.

On February 7, DC Attorney General Brian L. Schwalb announced that Amazon will pay $3.95 million to settle charges that the e-commerce monopoly withheld tips from Amazon Flex drivers to offset wages.

A Federal Trade Commission investigation found that Amazon had withheld over $61 million of tips from drivers in the course of two and a half years, until the e-commerce monopoly reverted back to previous hourly wages and paid drivers 100% of tips after receiving notice of the investigation in 2019. Amazon paid over $61 million to settle the 2021 FTC lawsuit, which was used to pay the drivers back their withheld tips. The e-commerce monopoly will now be paying the additional $3.95 million in injunctive relief and civil penalties to settle Schwalb’s 2022 lawsuit against Amazon for violating DC’s consumer protection laws by deceiving consumers on where their tips went.

Amazon began its Flex program in 2015, where people sign up to deliver packages with their own vehicles as independent contractors and not as Amazon employees. Flex drivers were paid flat hourly rates of $18-25 depending on the number of deliveries, in addition to 100% of tips for drivers who delivered for Prime Now and Amazon Fresh services. In 2016, Amazon lowered this hourly rate based on the area’s average tips and utilized around a third of the tips to pay drivers the $18 minimum, according to the 2021 FTC lawsuit. No notices were sent to drivers on this change. When drivers asked management about reduced wages, Amazon sent emails claiming that drivers were still being paid 100% of tips. Amazon also stopped listing tips and hourly rates separately, reporting drivers’ earnings as a single lump sum.

Companies like DoorDash, Instacart, and Uber often withhold tips from workers to minimize labor costs and increase profit, folding the tips into the promised minimum wage for drivers. These companies have also spent millions of dollars to back laws that allow them to classify drivers as independent contractors, which help to cut costs and to quickly hire and fire workers depending on the demand for labor. As independent contractors, drivers of these companies are not covered by overtime and minimum wage laws and ineligible for benefits such as healthcare, worker’s compensation, and unemployment insurance. Amazon forces Flex drivers to pay the costs of gas, tolls, and vehicle damage, as well as both employee and employer taxes as independent contractors. Excluding a portion of workers from receiving legal protections deepens the stratification of the working class, where some gets rights under the law, and others do not.

image: An Amazon Flex delivery vehicle

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