Federal trade The Commission said on Tuesday that Amazon had agreed to reimburse drivers for its Flex delivery service for nearly $ 62 million that consumers had anticipated as tips, but which Amazon kept for several years. The FTC called Amazon’s tipping practices “deceptive”.
“We have a long history of prosecuting bogus business opportunities and bogus revenue claims. This affair gives a touch of Internet economy to this story, ”Rebecca Kelly Slaughter, acting FTC president, Democrat told reporters on Tuesday.
In other words: beware of concert companies. The move is “unmistakably an indication of the agency’s commitment to devote additional attention and enforcement resources to monitoring the behavior of in-service employers and punishing misrepresentation and fraud,” says William Kovacic, former president of the FTC and now a professor at George Washington University School of Law. “It’s an extension.”
According to an FTC complaint, the settlement stems from advertisements Amazon released when Amazon Flex launched in 2015, through which workers sign up as independent contractors delivering Amazon products. Those announcements – and subsequent statements from Amazon – promised potential workers $ 18 to $ 25 an hour in base pay, plus 100 percent of customer tips. But the FTC alleges that by the end of 2016, Amazon had started using an algorithm to determine new base wage rates by worker location and to subsidize that base wage with tips to customers. This meant that if, for example, Amazon determined that the base pay rate for that region was $ 14, and a customer tipped a driver $ 4 for their job, Amazon would use the customer tip to meet the minimum promised wage of 18 USD.
The complaint indicates that hundreds of drivers have complained to Amazon about the pay gaps. A 2019 Los Angeles Times item described drivers, randomly assigned to deliver packages to their homes, giving themselves very precise figures to determine if full tips were reaching their accounts. They weren’t. Meanwhile, according to the FTC, internal emails from Amazon show employees describing the situation as “a huge PR risk for Amazon” and “a powder keg of Amazon’s reputation.” In mid-2019, Amazon adjusted its failover practices.
As part of the settlement, Amazon will pay the $ 62 million to the FTC, which will then return the money to the drivers who earned it. The FTC does not yet know how many drivers will be eligible for payments, according to spokesman Jay Mayfield. Amazon did not respond to a request for comment.
Other concert companies have similarly manipulated workers’ tips and wages – and, to a lesser extent, have also come under fire from regulators. In 2019, after a public outcry, DoorDash changed a policy that used client advice to subsidize the minimum wage rate for its workers. Instacart was also accused of misleading customers into believing that an optional service charge would be perceived as tips for workers. (The company changed its policy on fees in 2018.) Both companies were sued by the District of Columbia for consumer deception. The Instacart case is pending, but DoorDash last November paid $ 2.5 million to DC for misleading consumers about tips.