FTC approves $ 61.7 million settlement with Amazon to pocket drivers’ tips • The Register
The U.S. Federal Trade Commission on Friday announced the approval of a consent order against Amazon that requires the company to pay $ 61.7 million to resolve charges that, for two and a half years, it took tips to Amazon Flex drivers and covered up the embezzlement.
The deal was proposed in February but required approval from the U.S. trade watchdog. As a result of the FTC charges, Amazon misrepresented both Amazon Flex drivers and the public what the company would pay for delivery work.
The tech giant launched its Flex service in 2015, promising drivers – which it classified as independent contractors and called “delivery partners” – that it would pay $ 18-25 an hour for the delivery of goods. Amazon.com, Prime Now (housewares), Amazon Fresh (grocery store), and Amazon Restaurant (takeout).
Amazon’s ads made promises like, “You will receive 100% of the tips you earn by shipping with Amazon Flex.”
However, during the period from late 2016 to August 2019, drivers – who as independent contractors paid for their own car, fuel, maintenance and insurance – saw only part of the tip promised when customers chose to leave a tip.
This is because Amazon allegedly, without telling its drivers, adopted a “variable base pay” rate, which varied by location, was not disclosed to drivers, and was often less than the promised time slot. .
“As part of the variable base pay approach, for more than two and a half years, Amazon has secretly reduced its own contribution to driver pay to an internal ‘base rate’ defined by an algorithm using data that ‘he collected on average tips in the area,’ FTC complaint [PDF] Explain.
“The base rate varied depending on the location and sometimes varied within the same market. But that algorithmically defined “base rate” was often lower than the $ 18- $ 25 per hour range Amazon promised at the time of driver registration and in specific block offerings. “
To compensate for any difference between the base rate and the advertised minimum, Amazon would have used all or part of the tips left by customers to meet its payment commitment. For example, if Amazon set a base rate for a region at $ 12 and the customer left a $ 6 tip through Amazon’s electronic tip collection system, the company only paid the driver $ 12. and increased the payment with the tip by $ 6, instead of paying the $ 18.
To hide this calculation, Amazon displayed the driver’s income in its driver app as the combination of his base rate and any tip rather than listing the two amounts separately. As described in the FTC’s complaint, Amazon did so on purpose and adopted a strategy to avoid communicating to drivers that their earnings had been affected by its change in pay rate.
“Amazon employees also acknowledged internally that Amazon was using customer advice to subsidize its minimum driver payments, and that these subsidies were saving Amazon millions of dollars at the expense of drivers,” the complaint explains. “In emails from August 2018, Amazon employees called the issue a ‘huge public relations risk for Amazon’ and warned of ‘a powder keg of Amazon reputation’.”
Asked by a reporter about its flex compensation practices in February 2019, Amazon offered a response that dodged the question, according to the complaint. In May 2019, the FTC told Amazon it was investigating the company’s Flex payment practices. Then, in August 2019, Amazon announced an “Updated Revenue Experience,” offering terms similar to its initial broken pledge: to allow drivers to keep 100% of all tips.
The $ 61.7 million settlement represents the amount of tips Amazon allegedly withheld from drivers and prohibits Amazon from distorting likely drivers’ earnings and altering how tips are used as compensation without the prior consent of the driver. driver. These requirements will last for 20 years and carry civil penalties of $ 43,792 per violation.
The FTC says it will release the funds to affected Flex drivers within six months of receiving payment and driver information from Amazon.
Amazon did not respond to a request for comment. ®