Amazon has agreed to pay $3.95 million to settle a lawsuit brought by D.C. Attorney General Brian L. Schwalb, accusing the company of misleading customers and diverting tips from its Flex drivers between 2016 and 2019.
Allegations Against Amazon
The lawsuit claimed that Amazon promised customers that 100% of their tips would go directly to Flex drivers, who use their own vehicles for deliveries. However, the company allegedly changed its payment model in 2016 without informing drivers or customers.
Instead of allowing tips to increase driver earnings, Amazon allegedly used them to subsidize base wages the company had already promised. This allowed Amazon to cut labor costs and increase profits while misleading both drivers and consumers about where their money was going.
“It’s not sufficient, after being caught, to simply give back the ill-gotten gains,” Schwalb said. “Rather, there must be meaningful consequences to deter misconduct from happening in the first place. Especially when living expenses are harder and harder to afford, my office will continue to ensure that hardworking District residents receive every penny of their earnings and consumers have confidence that they are not being misled.”
FTC Investigation & Prior Settlement
Amazon continued using this model until 2019, when it became aware of a Federal Trade Commission (FTC) investigation. The FTC later found that Amazon had stolen over $1 million in driver tips.
“For nearly a decade, Amazon Flex has empowered delivery partners to earn extra money on their own schedules,” Amazon spokesperson Steve Kelly said. “Like any successful program, Amazon Flex has evolved over time, and this lawsuit relates to a practice we changed more than five years ago. While we continue to disagree with these allegations, we’re happy to have the matter behind us so we can continue to focus on supporting delivery partners and customers.“
In 2021, Amazon reached a restitution-only settlement with the FTC, ensuring that all stolen tips were repaid to drivers. However, the D.C. Attorney General’s Office pursued additional penalties, arguing that further consequences were needed to prevent future misconduct.
Settlement Details
Under the latest agreement, the company will pay $3.95 million in penalties and injunctive relief. The company has not admitted wrongdoing but has since changed its tipping policies.
This case highlights ongoing scrutiny over labor practices at major tech companies, particularly in the gig economy, where transparency and fair wages remain major concerns.
