Amazon has agreed to pay $4 million to resolve a lawsuit filed by one of Amazon’s subsidiaries, Flex’s drivers, who make use of their personal vehicles to deliver items. The company has agreed to pay a settlement to a lawsuit claiming that it collected payments from its drivers to cover labor costs and partially pay employees’ base salaries. By redirecting the tips, Amazon was able to raise its earnings and save millions of dollars in operational costs, according to the Attorney General who reviewed this case.
Amazon’s response
Amazon denied the accusations in an announcement to Fox News Digital, saying that Amazon Flex has changed since then. Steve Kelly, an Amazon representative, stated, “This case concerns a procedure that we modified over five years ago”. It was also stated that they were glad to have the issue resolved so that they can keep concentrating on helping delivery partners and customers.”
What started this lawsuit?
When Amazon Flex was first started in 2015, it promised that any payments paid by customers to drivers would be applied to their accounts. However, it appears that Amazon modified its driver compensation model in 2016 by using tips to compensate drivers for the base income that the company had previously offered them. Furthermore, it wasn’t until 2019 that Amazon was aware of the US Federal Trade Commission’s (FTC) investigation, that it informed drivers and customers of the regulation modification. Amazon was then charged with embezzling more than $1 million in payments. This isn’t the only case involving high-profile companies and financial disputes — the MyPillow FedEx shipping lawsuit similarly raised concerns about unpaid obligations and breach of contract.
The FTC’s earlier complaint claimed that the firm used information it gathered about typical tips in specific regions to systematically lower its salaries for drivers in various places. After conducting an investigation, the Federal Trade Commission (FTC) claimed that the business had neglected to notify drivers and customers of this change. The retailer modified this procedure in 2019 after learning about the FTC’s inquiry. Amazon rejected the accusations and argued that it made truthful statements, even though it had accepted to pay the settlement within a month.
Amazon amends the Federal Trade Commission’s policy.
Amazon settled with the Federal Trade Commission in 2021, paying all of the drivers’ remaining tips. The Attorney General’s office submitted a lawsuit for temporary relief and criminal fines, arguing that they were justified to discourage illegal behavior, even if this settlement included reimbursement.
Even after figuring out the multi-million dollar agreement with the attorney general, Amazon believes that it did nothing illegal and was very clear about its limitations associated with driver tips. $1.5 million in expenses and $2.45 million in charges are included in the $4 million settlement.
Amazon will stick to its compensation regulations for now, but it pledges to be more open if the regulations change. In simple terms, a clear notice will be made on the organization’s website and app if it chooses to use tips for reasons other than delivery compensation to its staff.
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Read related cases in our Consumer & Product Lawsuits section.
