Amazon to pay nearly $62M to FTC for withholding tips from drivers

Amazon.com Inc. will pay nearly $62 million to settle a Federal Trade Commission charge that it withheld tips from its Amazon Flex drivers for more than 2.5 years, according to a settlement announced Feb. 2.

Under the terms of the settlement, Amazon will pay $61.7 million to the FTC, which will then return the funds to drivers whose tips were withheld.

FTC officials said in a call with reporters Feb. 2 that the settlement prohibits Amazon from lying about driver pay in the future and from secretly changing its treatment of customer tips without drivers' consent. Amazon Flex drivers are independent contractors that make Prime Now and Amazon Fresh deliveries using their personal vehicles.

The settlement is part of ongoing work by the FTC to ensure that companies treat gig economy workers fairly and honestly with regard to compensation, said Rebecca Kelly Slaughter, the agency's acting chairwoman, during the call.

According to the FTC, Amazon and its subsidiary, Amazon Logistics, regularly advertised that drivers participating in the Flex program would be paid $18 to $25 per hour to make deliveries to customers. The advertisements said Amazon Flex drivers would receive 100% of customer tips.

When Amazon began the Flex delivery program in 2015, it paid drivers the compensation it promised, Slaughter said. But Amazon began secretly diverting tips while falsely assuring drivers they were receiving 100% of the customer tips, she said.

Amazon changed its practices only after the FTC notified the company that it was under investigation, Slaughter said.

An Amazon spokesperson said in an emailed statement to S&P Global Market Intelligence that while it disagrees that the historical way it reported pay to drivers was unclear, the company added additional clarity in 2019 and is "pleased to put this matter behind us."

"If Amazon violates the FTC settlement, the company could be on the hook for monetary penalties for each violation, Slaughter said.