Amazon will pay $61.7 million to Flex drivers to settle allegations of stolen tips, after an extensive investigation by the US Federal Trade Commission. The figure represents the total amount of allegedly withheld tips over the two and a half years that Amazon Flex’s controversial base pay system was in place.
“In total, Amazon stole nearly one-third of drivers’ tips to pad its own bottom line,” FTC Commissioner Rohit Chopra said in a statement, accusing Amazon of “expanding its business empire by cheating its workers.”
The practice of using tips to pay drivers’ base salaries generated significant outcry when it was revealed by the Los Angeles Times’ Johana Bhuiyan in February 2019. Amazon initially defended the practice, saying drivers still received 100 percent of the tips sent by customers, even in instances when those tips displaced base pay that would otherwise have been provided by Amazon.
According to the FTC complaint, Amazon used this ambiguity to recruit drivers with promises of high base wages and the potential for significant tips — then pad its own bottom line by using tipped income to make up much of the paid base wage. In ____ materials, workers were told they would keep 100% of their tips, and separately guaranteed a base wage between $18 and $25 per hour. The drivers were not informed that the tips would sometimes be used to reimburse the base wage, resulting in some of the tipped amount going to Amazon rather than the driver.
According to the FTC, this gave Flex a significant advantage over competing delivery services.
Amazon discontinued the practice in August 2019,
Amazon reported $11.6 billion in profits over the course of 2019, with the Flex program accounting for just a tiny portion of the company’s operations.
DoorDash and Instacart both maintained a similar base-wage system, although neither company is part of today’s settlement. Instacart reversed its policy in February 2019, shortly after the LA Times reporting brought it to light. DoorDash made similar changes the following July.