Amazon.com, Inc. and Amazon Logistics, Inc. have agreed to pay $3.95 million to the District of Columbia to resolve a lawsuit alleging the company misled customers about how their tips were distributed to Amazon Flex delivery drivers.
The lawsuit, brought by the D.C. Office of the Attorney General (OAG), accused Amazon of diverting a substantial portion of customer tips to reduce its labor costs while ensuring consumers that 100% of tips would go to drivers.
“When companies mislead customers to boost their profits by stealing tips intended for their workers, they are cheating their consumers, their employees, and their competitors who play by the rules,” said Attorney General Brian L. Schwalb. “It’s not sufficient, after being caught, to simply give back the ill-gotten gains. Rather, there must be meaningful consequences to deter misconduct from happening in the first place. Especially when living expenses are harder and harder to afford, my office will continue to ensure that hardworking District residents receive every penny of their earnings and consumers have confidence that they are not being misled.”
According to the lawsuit, from late 2016 to August 2019, Amazon quietly altered its payment structure for Amazon Flex drivers. Instead of adding customer tips on top of base wages, the company used tip money to cover its pre-existing wage commitments, effectively pocketing much of what customers believed was going directly to drivers. Despite the change, Amazon continued to assure customers that 100% of their tips would benefit drivers. The lawsuit, filed under the District’s Consumer Protection Procedures Act, accused Amazon of deceptive trade practices by failing to disclose the new policy and misleading customers into thinking their gratuities were making a difference.
“Like any successful program, Amazon Flex has evolved over time, and this lawsuit relates to a practice we changed more than five years ago,” Amazon spokesperson Steve Kelly said in a statement.
Amazon Flex, launched in 2015, allows independent drivers to deliver packages for Amazon and earn customer tips. During the checkout process, Amazon encouraged tipping and pre-set default tip amounts. The company then manipulated the payment model to shift a significant portion of those funds into covering labor costs while maintaining the illusion that drivers were receiving all the tips.
The OAG’s legal action followed a separate settlement with the Federal Trade Commission (FTC), under which Amazon reimbursed drivers for the tips it had withheld. However, the District pursued its own lawsuit to impose additional financial penalties and enforce greater transparency.
Under the agreement, Amazon must pay the District $3.95 million, including $2.45 million in penalties and $1.5 million to cover litigation costs. Additionally, the settlement requires Amazon to implement clear disclosures regarding how tips are used. If the company applies any portion of tips toward covering wages instead of increasing driver earnings, it must explicitly inform customers through its website and mobile app. These requirements will remain in effect for five years.
“When consumers tip, they deserve to know where their money is going, and workers deserve to be paid fairly,” Schwalb said.
