On Wednesday, Karl Racine, Washington DC’s Attorney General, filed a lawsuit against Amazon accusing it of deceiving its customers and “stealing” tips form delivery drivers.
AG Karl Racine, who announced Wednesday his lawsuit against Amazon, said that the company had “stolen tips from delivery drivers through an illegal scheme that tricked consumers into believing they were increasing drivers’ compensation.” However, Amazon was diverting tips in order to lower its labor costs and increase its profits.
Racine stated that workers in the District of Columbia, and across the country, are often exploited and not paid their hard-earned salaries. “Consumers need to be able to see where their tips are going,” Racine said. This suit is about giving workers the tips they owe and telling the truth to consumers.
“Amazon, the world’s richest company, doesn’t need to take tips from workers. Racine said that Amazon could and should do better.
Amazon Flex, an e-commerce service that offers faster delivery, was launched in 2015. Amazon Flex service, which offers faster delivery for thousands of orders per week, is currently being used by the tech giant to fill thousands of orders each week for customers in Washington DC.
Customers are encouraged to tip delivery drivers when they check out. The company provides a default tip amount, and guarantees that 100% of tip money will go to drivers.
Racine stated in his press release that Amazon had changed its payment model in 2016 so that a significant portion of tips didn’t go to drivers but went towards paying a portion what it had promised to pay to them.
Racine explained that while the company was telling its customers that 100% of tips went to delivery drivers, Racine said that this was despite the fact the e-commerce giant secretly using the tips to subsidize labor costs and increase profits.
Amazon saw significant cost savings as a result its deceptive tactics. This policy was in effect for many years. D.C. residents paid millions in tips to their delivery drivers in order to thank them for providing a valuable service.
Amazon also used many of these tips to reduce its operating costs and deceive both District consumers as well as Amazon Flex drivers.
Amazon was ordered by the FTC to pay $61.7million to settle claims that it failed to pay Flex drivers full tips.
Amazon took the money instead of passing on 100% of tips from customers to drivers as promised. “Our action today returns to drivers the tens to millions of dollars worth of tips that Amazon misappropriated and requires Amazon drivers to give their permission before changing how it treats tips in the future,” a FTC official stated at the time.
Silicon Valley delivery companies have used similar schemes to avoid stiff drivers in the past.