Amazon has agreed to pay $3.95 million to settle a lawsuit in which it was accused of subsidizing its labor costs by stealing the tips its drivers received to cover part of the employees’ base wages, D.C. Attorney General Brian L. Schwalb announced Friday.
According to Schwalb, Amazon misled consumers in Washington, D.C., between 2016 and 2019 by assuring them that all the tips they provided would go to Amazon’s Flex drivers, employees who deliver packages with their own cars.
Schwalb’s office alleged that by diverting millions of dollars in tips, Amazon was able to save on its own operating costs and therefore increase profits.
“When companies mislead customers to boost their profits by stealing tips intended for their workers, they are cheating their consumers, their employees, and their competitors who play by the rules,” Schwalb said.
Amazon said in a statement to Fox News Digital that the company disagrees with the allegations, noting that Amazon Flex has evolved since then.
“For nearly a decade, Amazon Flex has empowered delivery partners to earn extra money on their own schedules,” Amazon spokesperson Steve Kelly said. “Like any successful program, Amazon Flex has evolved over time, and this lawsuit relates to a practice we changed more than five years ago. While we continue to disagree with these allegations, we’re happy to have the matter behind us so we can continue to focus on supporting delivery partners and customers.”
When Amazon Flex launched in 2015, consumers were able to tip their delivery drivers at checkout, which stated that 100% of the tips would go to the drivers.
The lawsuit claimed that Amazon changed its driver payment model the following year, and that instead of allowing the tips to increase the driver’s total compensation, the company used it to cover the employees’ base wages Amazon had already promised to pay the drivers.
According to the Federal Trade Commission, the payment model change was not disclosed to the drivers or the consumers, allowing the model to continue taking tips until 2019, when Amazon became “aware of the FTC’s investigation in 2019.”
The company was accused of stealing more than $1 million in tips to cover its labor expenses.
As part of a settlement with the FTC in 2021, all the customer tips at issue were eventually paid to the drivers, according to an Amazon spokesperson at that time.
Aside from the restitution-only settlement with the FTC, the attorney general’s office filed a lawsuit for injunctive relief and civil penalties, noting that additional penalties were warranted to disincentivize unlawful behavior.
“It’s not sufficient, after being caught, to simply give back the ill-gotten gains,” Schwalb said. “Rather, there must be meaningful consequences to deter misconduct from happening in the first place. Especially when living expenses are harder and harder to afford, my office will continue to ensure that hardworking District residents receive every penny of their earnings and consumers have confidence that they are not being misled.”
According to the settlement, Amazon has denied all the allegations and claims.
“Amazon maintains that it made truthful, complete, unambiguous, and accurate representations to customers regarding tips for drivers,” the settlement stated.
According to the settlement terms, Amazon will pay $3.95 million, including $2.45 million in penalties and $1.5 million in costs.
The company has also agreed to maintain transparent tipping practices.
“If Amazon uses tips for any purpose other than increasing driver compensation, the company must make clear disclosures about how tips are used on both its website and its app,” the settlement stated.
Fox News’ Daniella Genovese contributed to this report.
Credit: Source link
