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Amazon to pay $61.7 million in independent contractor action; other platforms could come under scrutiny

February 03, 2021

Amazon will pay more than $61.7 million in the wake of Federal Trade Commission charges that it didn’t pay Amazon Flex independent contractor drivers the full amount of tips they received. The FTC voted 4-0 to issue an administrative complaint against the company, and some commissioners said other on-demand platforms could also come under scrutiny.

In a statement by two commissioners, they wrote the “platforms that facilitate the gig economy must treat their workers fairly and non-deceptively, just as they do consumers, and that the Federal Trade Commission should work to ensure that they do.” The commissioners were Noah Joshua Phillips and Acting Chairwoman Rebecca Kelly Slaughter.

News about the FTC decisions comes as Amazon also announced that Jeff Bezos will become executive chair in the third quarter while Andrew Jassy will take on the CEO and president role. Jassy is currently CEO of Amazon Web Services.

The $61.7 million in Tuesday’s announcement represents the full amount the company didn’t pay drivers that will be paid back to Amazon Flex drivers.

Amazon Flex is a program where independent contractor drivers use their own vehicles to make deliveries of goods and groceries ordered through the Prime Now and AmazonFresh programs.

The FTC alleges the company shifted from paying the drivers a rate of $18 to $25 per hour plus the full amount of customer tips to a lower hourly rate. The agency alleged Amazon used customer tips to make up the difference between the new, lower hourly rate and the promised rate of $18 to $25 per hour. The change was not disclosed to drivers.

“This theft did no go unnoticed by Amazon’s drivers, many of whom expressed anger and confusion to the company,” Commissioner Rohit Chopra wrote in a statement. “But, rather than coming clean, Amazon took elaborate steps to mislead its drivers and conceal its theft, sending them canned responses that repeated the company’s lies.”

Chopra also wrote the FTC must also take action against other firms with similar practices, writing that it “will also need to carefully examine whether tech platforms are engaging in anticompetitive conduct that hoodwinks workers and crushes law-abiding competition.”

Amazon’s lower hourly rate for Flex drivers began in 2016 and the firm continued using the new payment model until August 2019. The company then changed to a model where drivers were paid an identified base amount plus 100% of tips; the new model also gave a breakdown of drivers’ pay and tips.

The administrative complaint, along with the $61.7 million payment, was issued by the FTC, which will publish a description of the consent agreement for 30 days for public comment. After the 30 days, the commission will decide whether to make the order final.