Feb 10, 2025 05:46 PM IST
Amazon has agreed to pay $4 million to settle a lawsuit by its subsidiary Flex’s drivers, who deliver packages using their own cars
Silicon Valley giant Amazon has agreed to pay nearly $4 million to settle a lawsuit in the US which accused it of subsidising labour costs to cover part of employees’ base wages by stealing tips its drivers received.
Brian L Schwalb, Attorney General for the District of Columbia, said that Amazon saved millions of dollars in operating costs and increased its profits by diverting the tips.
The lawsuit claimed the company misled consumers between 2016 and 2019 by claiming that the tips they paid would go directly to Amazon’s Flex drivers, who deliver packages using their cars.
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What did Amazon say?
In a statement to Fox News Digital, Amazon said it disagrees with the allegations, claiming that Amazon Flex has evolved since then.
“This lawsuit is related to a practice we changed more than five years ago…We’re happy to have the matter behind us so we can continue to focus on supporting delivery partners and consumers,” Amazon spokesperson Steve Kelly said.
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What had happened?
Amazon Flex was launched in 2015, claiming that 100% of the tips that consumers would give to drivers would be credited to their accounts. However, in 2016, Amazon allegedly changed its driver payment model, using tips to cover the base wages which Amazon had already promised to drivers.
Additionally, Amazon did not disclose the change in its policy to both consumers and drivers till 2019, when the company became “aware of the US Federal Trade Commission’s (FTC) investigation”. Amazon was then accused of stealing over $1 million in tips.
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Amazon settles with FTC
Amazon had settled the allegations with FTC in 2021 by eventually paying all tips to the drivers. While this was a restitution-only settlement, the District of Columbia Attorney General’s office filed a lawsuit for injunctive relief and civil penalties, noting that they were warranted to disincentive unlawful behaviour.
Amazon will now be paying $3.95 million, including $2.45 million in penalties and $1.5 million in costs.
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