Amazon to Pay $4 Million to Settle Suit Alleging It Misled Customers on Drivers’ Tips

An Amazon delivery hub during Prime Day in Torrance, Calif., on July 12, 2022. Patrick T. Fallon/AFP via Getty Images

Amazon has agreed to pay $3.95 million to settle allegations that it misled customers on tips meant for its delivery drivers.

The settlement, announced Friday by District of Columbia Attorney General Brian Schwalb, resolves a 2022 lawsuit alleging Amazon violated the district’s consumer protection laws by deceiving customers about who was receiving gratuities.

Under the terms of the settlement, Amazon will pay the district $2.45 million in penalties in addition to $1.5 million in legal fees. The company also promises to properly disclose on its website and its app if it uses customer tips for anything other than increasing driver pay.

Amazon has denied the allegations and did not admit to wrongdoing as part of the deal.

“Like any successful program, Amazon Flex has evolved over time, and this lawsuit relates to a practice we changed more than five years ago,” a spokesperson for the company said in a statement.

The settlement came four years after the Federal Trade Commission (FTC) ordered the e-commerce giant to repay $61.7 million in tips it allegedly withheld from more than 140,000 Amazon Flex drivers to subsidize its labor costs.

“Amazon drivers have already been reimbursed,” said a statement from Schwalb’s office. “Now, under this agreement, Amazon is required to pay additional financial penalties, cover the cost of OAG’s litigation, and change its business practices.”

Launched in 2015, Amazon Flex allowed individuals to sign up for shifts using their own cars to deliver Amazon packages. According to the complaint, the company advertised that drivers could earn $18 to $25 per hour, plus tips, assuring both drivers and customers that “100 percent of tips” would go directly to couriers.

In late 2016, however, the company started skimming drivers’ tips, the FTC alleged. According to the complaint, the company quietly switched to a variable-pay system in which drivers’ earnings could fluctuate based on an internal algorithm without notifying customers or drivers.

Under that system, the government said, if a customer tipped $6 on a delivery with a promised minimum payout of $18, Amazon would reduce its base contribution to $12 so the driver still received only $18—effectively pocketing the $6 tip.

The federal agency also accused Amazon of discouraging customers from tipping in cash, with the app saying that “cash is not accepted upon delivery.”

Under the 2021 settlement terms, Amazon is prohibited from misrepresenting information about how much a driver is likely to get paid, how much of a tip goes to the driver, and whether the amount paid by a customer is a tip. The company is also prohibited from making changes to how a driver’s tips are used without the driver’s consent.

Amazon did not admit to wrongdoing as part of the 2021 settlement.