DC sues Amazon for using $1 million in tips meant for delivery drivers to cover labor costs

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District of Columbia Attorney General Karl Racine. (AP Photo/Susan Walsh)

DC sues Amazon for using $1 million in tips meant for delivery drivers to cover labor costs

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The D.C. Attorney General’s Office is suing Amazon and claiming it pocketed more than $1 million in tips as a way to subsidize the company’s labor costs while deceptively telling consumers 100% of the gratuity payments would go toward delivery drivers’ compensation.

In a lawsuit filed in the Superior Court of the District of Columbia on Tuesday, D.C. Attorney General Karl Racine is accusing Amazon of diverting a significant amount of tips meant for delivery drivers to go toward the company’s expenses without increasing the workers’ compensation.

“For years, [Amazon] solicited tips from its customers who placed orders for delivery by representing, as a reasonable consumer would assume, that each dollar tipped would increase delivery driver compensation,” the 17-page lawsuit states. “Corporations should not be treated more leniently than people: when a company is caught stealing from its workers, it is not enough for the company to repay the amount stolen. Stealing from workers is theft, and significant penalties are necessary to strongly disincentivize this unlawful conduct.”

From late 2016 to September 2019, Amazon allegedly used tips as a way to pay a portion of drivers’ compensation that was already promised through their employment contracts, subsidizing the company’s labor costs while misleading consumers to believe 100% of the tip was being added as a bonus payment.

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https://twitter.com/AGKarlRacine/status/1600483140002258948?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Etweet

Amazon introduced its tip feature in 2015 after it launched its Amazon Flex service. During the first year of Amazon Flex, the company allowed 100% of the additional compensation to be allocated to delivery drivers, according to the lawsuit. However, the company began adjusting its payment model so that a large percentage of tips would go toward covering labor costs, all the while continuing to tell consumers and employees that 100% of the tip amount would go toward delivery drivers, the lawsuit alleges.

The Federal Trade Commission launched an investigation into such practices in 2019, coming to a $61.7 million settlement with Amazon that would go toward paying restitution to delivery drivers who lost money through the company’s practices. However, Racine’s lawsuit seeks to go a step further, noting Amazon has not faced any consequences for misleading consumers.

“While Amazon later paid restitution to drivers as part of an FTC settlement, it has not paid any civil penalties in connection with the misrepresentations and omissions it made to consumers with respect to these deceptive tipping practices,” the lawsuit states. “Amazon has thus far escaped any other consequences. [The D.C. Attorney General’s Office] brings this enforcement action to hold Amazon to full account for its unlawful actions, and to send a clear message to employers not to divert tips for their own benefit.”

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The D.C. attorney general is seeking a jury trial to decide on a restitution amount to be paid by the company “to the extent it has not already been provided,” the lawsuit states.

Amazon responded to the lawsuit, decrying the district for renewing a lawsuit it said had already been settled.

“Nothing is more important to us than customer trust,” said Amazon spokeswoman Maria Boschetti. “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.”

© 2022 Washington Examiner

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