Amazon this week revealed a new way for customers to thank their delivery drivers — but those drivers could be due for an apology too.
On Wednesday, Amazon (NASDAQ: AMZN) rolled out a feature that will give delivery drivers an additional $5 when a customer tells his or her Alexa device, “Alexa, thank my driver.”
Amazon — not the customer — will make the payment to the driver who delivered that customer’s most recent package. The feature will apply to the first million thank-you’s, and the five drivers with the most acknowledgments during that time will receive $10,000 for themselves and a charity of their choice.
But the inconspicuousness of the promotion was short-lived.
On the same day, Washington Attorney General Karl Racine announced a lawsuit was filed against Amazon and Amazon Logistics for allegedly using tips intended for drivers for their own benefit.
The suit accuses the e-commerce giant of misleading customers into thinking they were tipping delivery drivers. But in reality, the attorney general’s office claims, it was using the money to boost profits and support its own labor costs.
“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 in a statement. “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’s office alleges that Amazon violated the district’s Consumer Protection Procedures Act by misleading both customers and delivery drivers about where their tips were going.
The suit revolves around workers who drive for Amazon’s Flex service, which was launched in 2015 and serves tens of thousands of customers in the Washington area, the office said. But beginning in 2016, it alleges, Flex changed its driver payment model to bake customer tips into base pay, without telling drivers or customers.
At checkout for orders delivered by Flex drivers, customers were encouraged to add a driver tip and were even presented with a preselected amount. According to the suit, Amazon specifically told customers that “100% of your tip goes to your courier.”
But while true, the statement was misleading because the money was being used to subsidize driver base pay, not add to it, Racine alleged.
Watch: How the right pay, benefits and incentives attract drivers
Amazon claims that it ceased the practice in 2019 and that its settlement with the FTC covers the payment drivers should have received through tips. As part of that deal, the company agreed to abstain from modifying driver pay without notifying drivers beforehand.
“Nothing is more important to us than customer trust. This lawsuit involves a practice we changed three years ago and is without merit — all of the customer tips at issue were already paid to drivers as part of a settlement last year with the FTC,” Amazon said in a statement to Modern Shipper.
Per Amazon’s website, Flex drivers are paid $18 to $25 an hour on average. But the company notes that pay can depend on location, tips received, delivery speeds and other factors.
Reports dating back to 2019 have accused Amazon of using tips to fund up to 100% of driver pay per trip, while contributing zero itself. For instance, if a driver made $12 in tips, the company might pay him or her $6 for a total of $18, rather than adding to that base pay.
One driver in Virginia, for example, said he ordered paper towels for his family and tipped himself $15.90 after being assigned the order. But when he checked his payment at the end of his shift, there were no tips credited. After reaching out to Amazon, he said, the company adjusted his pay to include additional tips but offered no explanation for the discrepancy.
As a result of this practice, the district’s suit alleges, Washington-area customers ended up paying millions of dollars to support what were, effectively, Amazon’s operating costs.
Yet another claim made in the suit is that Amazon began obscuring tip amounts from drivers to hide its practice of repurposing tips. But when drivers caught on, the company apparently responded with misleading language that made no mention of changes to its payment model.
In 2021, Amazon paid out $62 million to Flex drivers as part of a settlement with the Federal Trade Commission. But Racine is now seeking civil penalties for consumer harm and a court order that would prevent the company from subsidizing driver base pay with tips in the future.
Click for more Modern Shipper articles by Jack Daleo.
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