Washington DC Attorney General Karl Racine filed a lawsuit against Amazon on Wednesday, accusing the tech giant of deceiving its customer base and “stealing” tips from delivery drivers.
In a press release on Wednesday, AG Karl Racine announced his new lawsuit against Amazon, and accused the company of “stealing tips from delivery drivers through a deceptive, illegal scheme that tricked consumers into thinking they were increasing drivers’ compensation when Amazon was actually diverting tips to reduce its own labor costs and increase profits.”
“Workers in the District of Columbia and throughout our country are too often taken advantage of and not paid their hard-earned wages,” Racine said. “What’s more, consumers need to know where their tips are going. This suit is about providing workers the tips they are owed and telling consumers the truth.”
“Amazon, one of the world’s wealthiest companies, certainly does not need to take tips that belong to workers. Amazon can and should do better,” Racine added.
In 2015, the e-commerce giant launched its Amazon Flex service, which offers faster deliveries. The tech giant currently fills thousands of orders on a weekly basis for tens of thousands of customers in Washington DC.
When customers are checking out, they are encouraged to tip their delivery drivers. The company offers a default tip amount and assures consumers that 100 percent of the tip amount would go to the drivers.
But in 2016, Amazon changed its payment model so that a large portion of the tips did not go to the drivers, but instead went toward paying a portion of what the company had already promised to pay the driver, Racine said in his press release.
Meanwhile, the company continued to tell its customers that 100 percent of the tips went to the delivery drivers, despite the fact that the e-commerce giant was “secretly using these tips to subsidize its own labor costs and increase profits,” Racine added.
“As a result of its deceptive tactics, Amazon experienced significant cost savings. In the years Amazon had this policy in place, consumers in D.C. paid millions of dollars in tips to reward their delivery drivers for providing a valuable service.
Meanwhile, Amazon used much of those tips to save on its own operating costs, thereby deceiving both District consumers and Amazon Flex drivers.”
Last year, Amazon was ordered to pay $61.7 million to settle allegations by the FTC that the company failed to pay Flex delivery drivers the full amount of tips given to them by customers.
“Rather than passing along 100% of customers’ tips to drivers, as it had promised to do, Amazon used the money itself. Our action today returns to drivers the tens of millions of dollars in tips that Amazon misappropriated, and requires Amazon to get drivers’ permission before changing its treatment of tips in the future,” an FTC official said at the time.
Silicon Valley companies offering delivery services have used a similar scheme to stiff delivery drivers in the past.