Amazon Pays Nearly $4M to Settle Lawsuit Alleging Misappropriation of Drivers’ Tips

Amazon is paying just under $4 million to settle a lawsuit filed by Washington, D.C., Attorney General Brian L. Schwalb. The AG’s office alleges the company misinformed consumers about tips given to Amazon Flex drivers.

Between 2016 and 2019, the retailer allegedly lowered operating costs and increased profits by using tip money received by drivers to cover part of their base pay. Collectively, drivers lost over $1 million in tips.

“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,” said Schwalb, per FOX Business. 

Starting in 2015, when Amazon Flex was launched, the driver payment terms indicated that tips customers gave out were over and above any base income the company paid to drivers. Yet, according to the lawsuit, Amazon quietly changed the payout plan a year later, and tips were then considered part of a driver’s base compensation.

When the Federal Trade Commission (FTC) looked into the matter, the agency alleged that the company failed to disclose this change to both drivers and consumers. In 2019, the retailer changed the practice, but only after it found out about the FTC’s investigation.

Amazon Responds to Settlement With AG

A settlement with the FTC in 2021 led to Amazon paying the tips to the drivers. Since the company’s punishment by the FTC only included restitution, the attorney general’s office filed its own litigation shortly thereafter. The AG’s lawsuit was seeking injunctive relief as well as civil penalties, which were included as a means to deter Amazon from engaging in a similar practice again.

“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.”

Despite the multi-million-dollar settlement with the attorney general, Amazon claims it was very clear about the terms regarding driver tips and did nothing wrong. The nearly $4 million payout includes $2.45 million in penalties and $1.5 million in costs.

Amazon will maintain its tipping policy for now but promises to be more transparent if the rules change. Essentially, if the company decides to use tips for other purposes beyond delivery worker compensation, a clear disclosure will be provided on its website and app.