Amazon Drivers Awarded $60 Million After Amazon Withheld Tips

Posted by Viviana Vazquez in CareerNovember 8, 2021(Last Updated July 25, 2022)2 min read
Key Takeaways
  • On November 2, 2021, the Federal Trade Commission (FTC) announced that Amazon would be compensating over 140,000 drivers with over $60 million due to underpaying them between 2016-2019.
  • Initially, the drivers were to receive an hourly wage between $18 and $25, along with the tips given to them by the customers.
  • However, as the retail giant illegally withheld a portion of the drivers’ money, if Amazon wishes to change the compensation formula in the future, they must receive the driver’s consent to do so.
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On November 2, 2021, the Federal Trade Commission (FTC) announced that Amazon must repay $60 million to its Amazon Flex drivers. In February, a settlement was agreed upon, with the e-commerce giant agreeing to compensate the affected drivers accordingly. This money was from Amazon illegally withholding tips the employees received. As a result, there will be 139,507 checks and 1,621 PayPal payments made to the drivers, with the highest amount exceeding $28,000.

 

What is Amazon Flex?

 

Amazon Flex is a division of Amazon that contracts independent drivers and delivers goods and groceries ordered to their customers. Amazon Flex differs from Delivery Service Partner, also known as (DSP). DSP relies on smaller companies to complete deliveries, whereas Flex uses individuals not affiliated with any organization. 

 

Image Credit: Cineberg / Shutterstock.com

 

People who wish to be a Flex driver download the app and sign up to become an employee. Flex drivers deliver goods with the promise of employee wages between $18 and $25 an hour, plus keeping the total amount of the tips made from the deliveries.

 

Where Did Amazon Go Wrong?

 

Between 2016 and 2019, the e-commerce giant promised to pay these drivers a wage between $18 and $25. However, they under-compensated their employees and used the tips to make up the difference to save money. Furthermore, instead of informing employees of the new change in pay, they failed to mention it as they wished to save money to be used elsewhere.  

 

How was Amazon Caught for Illegally Withholding Tips?

 

The FTC alleges that the change in pay was initiated in late 2016, and as employees realized they were being compensated less for their work, they began to file complaints against Amazon. However, in response, they received a false email detailing that they were continuing to be compensated the same as before, with them receiving 100% of the tips. 

 

Image Credit: Ascannio / Shutterstock.com

 

 

Amazon continued the underpayment of their drivers until 2019. Soon after, they received a formal notice from the FTC that they were under investigation for withholding pay. Once they received formal notice of the investigation, the FTC claims that the corporation reinstated the original compensation method. 

 

How is Employee Compensation Affected?

 

As a result of the under-compensation of employees, there is a new condition that Amazon must comply with. If they wish to make any changes to a driver’s compensation, they must first have the driver’s consent.  

 

Amazon has had many issues in the past regarding the treatment of its employees. One of the more recent and memorable incidents was when they fired two employees for speaking out against its labor policies. However, Amazon has recently taken initiatives to support their employees better. One of these initiatives was the announcement in 2021 that Amazon would pay for their employees’ tuition fees.

 

What are your thoughts on the withholding of tips? Do you think the drivers should be given additional compensation? Let us know in the comments below. 

 

Main Image Credit: Tada Images / Shutterstock.com

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