Amazon is facing a lawsuit for allegedly withholding delivery drivers of their tips. According to Engadget, the retail company is being sued by the District of Columbia over claims that the company was "stealing" tips from Flex drivers.
According to Washington DC Attorney General Karl A. Racine, the company engaged in an illegal scheme of withholding tips and tricking its consumers in the process.
Racine said that Amazon tricked consumers into believing they were increasing driver's compensation. However, what the company does is divert tips in order to reduce its own labor costs and increase its profits.
Amazon Allegedly Used Drivers' Tips to Subsidize Own Labor Costs
The tip-stealing allegations were the highlight of the lawsuit filed by Racine against Amazon. According to the suit, the withheld tips were used by the company in order to subsidize its own labor costs.
The claims of the Attorney General are based on a fundamental change in the company's Flex tipping policy, according to Gizmodo.
When the freelance delivery program was launched in 2015, the company encouraged consumers to tip their drivers at checkout using a default presented tip amount.
During that time, users of Amazon were informed that 100 percent of those tips were received by the drivers. However, the retail company shrouds its tipping system in complexity.
According to the complaint, the company allegedly changed its tipping model in 2016 in such a way that drivers wouldn't directly receive their tips.
Part of the driver's tip went directly back to Amazon. The company used those funds to pay a portion of the pre-tipped wage that it promised to pay its workers.
The complaint also alleged that Amazon diverted a portion of those tips to cover the base pay of the drivers without actually increasing driver compensation.
All the while, the company falsely told consumers that 100 percent of tips proceed to drivers. Likewise, it used misleading language in its response to the worried courier.
Attorney General Wants Amazon to Face Civil Penalties
In a 2021 settlement with the Federal Trade Commission (FTC), Amazon addressed its tip manipulation issue.
The retail company agreed to pay the agency $61.7 million to account for the withheld tips. With that, the agency started paying out impacted drivers last year.
As part of the settlement, average impacted drivers received $422, while nearly 20,000 drivers received payouts in excess of $600.
However, according to Racine, those payouts weren't enough since the retail giant "has thus far escaped any other consequences."
The lawsuit stated said that when a company is caught stealing from its workers, repaying the amount stolen is not enough. Moreover, stealing from workers is theft'; thus, significant penalties must be employed to strongly disincentivize this unlawful conduct.
With the new lawsuit filed against Amazon, Racine wants to go beyond paying restitution to drivers. Instead, he wants the company to face civil penalties for deceiving its customers and violating the Consumer Protection Procedures Act.
The said act prohibits companies from misleading consumers or making misrepresentations. Moreover, the lawsuit aims to bar Amazon from doing such actions in the future.
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