by Benjamin Stein

Amazon agreed this week to pay the FTC more than $61M in order to compensate Amazon delivery drivers for customer tips that it represented would be provided to the driver, but that were actually used to offset Amazon's own driver payments.

In 2015, Amazon launched its Amazon Flex program to recruit independent drivers to make Amazon deliveries. Amazon consistently represented to drivers that they would receive 100% of the tips earned from deliveries, and made similar representations to customers making purchases via Amazon services that allowed for tipping, such as Prime Now and AmazonFresh. Amazon also told drivers they would earn between $18 and $25 an hour, and could "make more" by taking on deliveries eligible for tips.

Notwithstanding these representations, the FTC alleged that - from late 2016 until 2019 - Amazon surreptitiously adopted a "variable base pay" structure for its Amazon Flex drivers. Under this approach, Amazon would treat the bottom end of its $18-$25/hour payment range as a guaranteed minimum and use the customer's tip where necessary to cover the difference between Amazon's actual “base rate” contribution and the stated minimum.

Amazon did not seek its drivers' consent to this change or otherwise notify them it was modifying their pay structure. It also changed the way that it displayed per-job compensation so that tips were no longer itemized and the driver saw only a lump-sum calculation that pooled both the tip and Amazon's direct payment.

In fielding the driver complaints that followed, Amazon offered canned responses that reiterated that its "earnings commitment to delivery partners has not changed – delivery partners still earn $18-25 per hour including 100% of customer tips" – which, per the FTC's complaint, "only obscured that Amazon was diverting drivers' tips to its own use." Amazon made similar representations in response to reporters inquiring about its practices.

In May 2019, the FTC alerted Amazon that it was investigating the Amazon Flex pay structure and, in August 2019, Amazon reverted to a compensation structure that provides drivers with both the full amount that Amazon has agreed to pay for a particular delivery block and, separately, passes on any customer tips.

Under the proposed settlement, Amazon will pay back $61M in tips and agree to obtain "express informed consent" from drivers prior to any change that effects how a driver's tips are used towards Amazon's own pay contribution.

While tipping may not be a part of your business, this settlement is a useful reminder for all advertisers that claims must be both truthful and not misleading. Even if Amazon was, in fact, passing 100% of tips to each driver, failing to disclose that those tips were being used to reduce Amazon's own pay contribution could have been misleading under the circumstances. As always in advertising, make sure you do what you say – and what you imply.