The Federal Trade Commission (FTC) enforces laws prohibiting consumer fraud and deception. The Agency recently forced Amazon to pay $61.7 million worth of tips given by customers intended for drivers who worked as independent contractors. The Agency found the drivers never got the money because Amazon kept it. This case is attention-worthy not only because of who’s at fault and the amount at issue, but because a government agency stepped up to help gig workers, people who lack the legal protections of employees.

The FTC got involved because it saw drivers and customers as victims of Amazon’s fraudulent advertising and practices. If the drivers were employees who a company cheated out of tips, they would probably have gotten help from their state’s labor departments through wage and hour investigations. Employees may also be able to file lawsuits to get fully paid. However, as declared non-employees, Amazon drivers were not covered by state labor laws.

Amazon’s not the only one with its hands in the electronic tip jar, just the biggest and most well-known. Last November, DoorDash agreed to pay $2.5 million to the District of Columbia’s attorney general due to allegations it misled consumers and pocketed tips, according to CNBC. The agency also sued Instacart last year for similar reasons.

Payments to Drivers Weren’t What They Were Promised

Amazon Flex is a program where people using their vehicles deliver packages for Amazon. It started in 2015 and claimed drivers could make $18 to $25 an hour. One of the advertised factors in the pay structure was the tips you could collect. Amazon told drivers they would “pass to you 100% of tips you earn” and told customers that “100% of your tips are passed on to your courier”. That ended up being 100% false, according to CBS News. The FTC made public in February a settlement with the company.

In February of 2021, rather than passing along 100 percent of customers’ tips to drivers, as it had promised to do, Amazon used the money for itself, said Daniel Kaufman, Acting Director of the FTC’s Bureau of Consumer Protection. “Our action today returns to drivers the tens of millions of dollars in tips that Amazon

misappropriated and requires Amazon to get drivers’ permission before changing its treatment of tips in the future.”

Amazon will pay the tips it kept from 2016 to 2019. In late 2016, Amazon changed how it paid drivers so the rate paid would change based on a software program. To meet the claimed $18 dollar an hour minimum rate, a six-dollar tip would cut the company pay to $12/hour, instead of adding the six dollars so the driver could make $24/hour.

Neither drivers nor customers were notified of the change. Amazon started reporting driver earnings as a lump sum, concealing what was earned in tips and hourly pay, so drivers couldn’t tell who paid them how much. The company also discouraged tipping with cash. They wanted tips to be paid to Amazon electronically.

Drivers noticed the pay decrease after the change and complained to Amazon. Company emails falsely stated they could earn $18 to $25 per hour, including 100% of customer tips. Amazon failed to tell drivers their tips weren’t being added to their pay, rather they were being subtracted from their pay.

Federal Agency Focused on Fraud Gets Tips for Drivers

Complaints were also made to the FTC, which informed Amazon it was being investigated. The company changed its practices, telling drivers in August 2019 about an “Updated Earnings Experience.” The only update was that the company disclosed what it was doing. They didn’t change the system back to how it originally worked.

Amazon agreed to pay $61.7 million to the FTC, which will distribute the money to drivers. The agreement also formally prohibits the company from lying about tips and requires it to get drivers’ consent before changing payment models. Amazon’s total net revenue from 2016 to 2019 was $827 billion. A million saved here, a million stolen there, and pretty soon you’re talking real money.

During the first quarter of 2021, Amazon generated total net sales of approximately 108.52 billion U.S. dollars, surpassing the 75.45 billion U.S. dollars in the same quarter of 2020. Most Amazon revenues were via internet product sales.

The FTC could potentially pack a bigger punch if this comes up again. Jessica Rich, the former Director of the FTC’s Bureau of Consumer Protection, told Time magazine that if Amazon is accused of making “deceptive earnings claims” due to money it wrongly kept from contractors, the FTC could impose fines.

If You’re Getting Cheated Out of Pay, Contact Our Office at Once

If you have questions about getting full pay as an employee or independent contractor or believe you’re not getting everything you’re entitled to, contact our Kingston law offices. You may reach us online, via email (hisaacs@kingstonlawgroup.com), or by phone (609-683-7400).

We will schedule a near-term, reduced fee, initial consultation. We can be protected by social distance and masks, Zoom, or we can speak on the phone. We take credit card payments and have general appointments from 9 a.m. to 5:30 p.m., Monday through Friday. We can also schedule evening appointments during the week by pre-arrangement only.

We will listen to your facts, explain the law, and outline your best avenues for full recovery and economic justice. Contact us today. You’ll be glad you did.