Amazon agrees to pay $3.95 million to settle a lawsuit over allegedly misleading tipping practices for its delivery drivers in Washington, D.C.
Did Amazon think it could just get away with this?
At a Glance
- Amazon settles lawsuit with D.C. for $3.95 million over misleading tipping practices
- Lawsuit alleged Amazon used customer tips to offset labor costs instead of paying drivers
- Settlement includes penalties, litigation costs, and commitment to better communicate tip usage
- Amazon denies wrongdoing, stating practices were changed over five years ago
- Case follows a separate $61.7 million FTC settlement for withheld driver tips
Amazon’s Tipping Controversy
In a significant development for gig economy workers and consumers alike, Amazon has agreed to pay $3.95 million to settle a lawsuit filed by the District of Columbia over alleged deceptive practices regarding tips for its Amazon Flex delivery drivers. The lawsuit, filed under the District’s Consumer Protection Procedures Act, accused the e-commerce giant of misleading customers by claiming that 100% of tips would go to drivers while using a portion of those tips to reduce its own labor costs.
The settlement, which includes $2.45 million in penalties and $1.5 million for litigation costs, comes after allegations that from late 2016 to August 2019, Amazon altered its payment structure for Amazon Flex drivers. The company allegedly used customer tips to cover wage commitments instead of adding them to drivers’ base wages as customers intended.
Amazon Flex, launched in 2015, allows independent drivers to deliver packages and earn tips. The lawsuit claimed that Amazon’s practices not only affected drivers’ earnings but also misled consumers who believed their tips were directly benefiting the delivery personnel. The settlement requires Amazon to clearly disclose how tips are used and inform customers if tips are being used to cover wages rather than increase earnings.
“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. It’s not sufficient, after being caught, to simply give back the ill-gotten gains. 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,” Attorney General Brian L. Schwalb said.
The settlement’s disclosure requirements will remain in effect for five years, ensuring long-term transparency in Amazon’s tipping practices. This move is aimed at restoring consumer trust and protecting workers’ rights in the gig economy.
Amazon’s Response and Previous FTC Settlement
Despite the settlement, Amazon has not admitted to any wrongdoing. But they’re still paying.
A spokesperson for the company, Steve Kelly, stated, “Like any successful program, Amazon Flex has evolved over time, and this lawsuit relates to a practice we changed more than five years ago.”
This stance echoes the company’s response to a similar case with the Federal Trade Commission (FTC) in 2021.
The FTC case, which resulted in Amazon agreeing to pay $61.7 million to settle allegations of withheld tips, accused the company of implementing a variable-pay system without notifying customers or drivers. Under this system, Amazon allegedly reduced its base pay contribution when customers tipped, effectively using the tips to cover its own labor costs.
Will Amazon just keep paying fines or will it finally change its corporate culture to respect its workers?
