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FTC's Amazon settlement signals wider focus on worker protections, gig economy

The Federal Trade Commission's recent settlement with Inc. puts the rest of Big Tech on notice as the agency is signaling a willingness to investigate the treatment of temporary or contract workers employed in the so-called gig economy, regulatory experts said.

Historically, the FTC has focused on protecting consumers from fraudulent business practices, but the Amazon settlement indicates a shift toward focusing more on worker protections, said former FTC Chair William Kovacic, now a law professor at George Washington University.

"It's a way of telling the worker community and the companies that 'we'd be glad to do this again,'" Kovacic said of the settlement. He expects more cases will be filed this year.

While the $61.7 million settlement, announced Feb. 2, pertains solely to Amazon's treatment of tips for its contract delivery drivers, the FTC's new acting chairwoman, Rebecca Kelly Slaughter, hinted in a call with reporters that regulators were looking into similar misconduct by other companies.

SNL Image

The FTC's $61.7 million settlement with Amazon focused on tip policies for its contract delivery drivers.
Source: Amazon

The FTC's Amazon settlement adds to a growing number of lawsuits alleging unfair treatment of gig workers amid the pandemic. In November 2020, Washington, D.C. Attorney General Karl Racine announced a settlement with DoorDash Inc. that required the food delivery company to pay $2.5 million to resolve allegations that it used tips left for workers to boost the company's bottom line. Racine also filed a similar suit against grocery delivery service Instacart last year.

Amazon and other retailers have increasingly relied on gig economy workers to deliver goods since the start of the pandemic, but it is difficult to track how many workers are part of this group due to varying definitions of the category, which could include freelance, temporary and on-call workers.

The latest U.S. Bureau of Labor Statistics survey regarding gig workers found that there were 10.6 million independent contractors who accounted for 6.9 percent of total employment as of May 2017. The BLS also found that there were 2.6 million on-call workers and 1.4 million temporary help agency workers during that time.

These workers are particularly vulnerable to abuses by employers because they are not granted the same protections and benefits as traditional workers, said Maria Figueroa, director of labor and policy research at The Worker Institute at the ILR School at Cornell University. Regulatory action like the recent Amazon settlement is vital to reigning in gig worker mistreatment, she said.

"This ruling sends a clear precedent that you cannot do that," Figueroa said.

The ruling could also have implications for Big Tech companies facing growing antitrust scrutiny. The settlement "speaks to the brighter spotlight on these issues for Big Tech going forward," said Daniel Ives, an analyst with Wedbush Securities, in an email.

The FTC's authority under current law is limited to issuing civil penalties for violations case by case if settlements such as the one with Amazon are violated, with the maximum civil penalty set at $43,280. However, Kovacic said the agency is seeking broader authority by Congress to make rules regarding fraudulent business practices that it could then enforce.

"They want a mandate from Congress that says instead of going case by case, you can convene a process to issue what's called a rule that will spell out standards of conduct," Kovacic said.

The FTC could then use the rule-making authority to go to court and seek not only an injunction that forces companies to comply with the law but also collect a civil penalty for each infringement that has taken place, he said.