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Have you noticed shopping on Amazon has gotten worse? Here's why
01:32 - Source: CNN
Washington CNN Business  — 

Amazon faces a new lawsuit from the attorney general of Washington, D.C. that alleges the e-commerce giant used customer tips meant for delivery drivers to reduce what it owed in driver wages.

The lawsuit by Attorney General Karl Racine further claims that Amazon covered up the practice, which allegedly began in 2016. The allegations are virtually identical to those leveled previously by the Federal Trade Commission, which announced a settlement with Amazon on the matter in 2021.

The business practice at issue involved Amazon’s public claims that it would pay Amazon Flex delivery drivers a rate of at least $18 per hour, plus 100% of any tips that customers contributed. According to the FTC, and now Racine, Amazon in 2016 changed its payment model without notifying drivers or customers. The new model allegedly used a portion of customer tips to subsidize Amazon’s own labor costs, and tried to hide the change from drivers by reporting their tips and wages as a combined figure.

Racine’s office said Tuesday it is bringing the new complaint because the FTC settlement, although it involved Amazon agreeing to pay drivers a total of $61.7 million to make them whole, did not impose any fines on the company.

Amazon “has thus far escaped appropriate accountability, including any civil penalties, for consumer harm,” Racine’s office said in a release. It added that the DC lawsuit seeks civil penalties “for every violation” of DC’s consumer protection law stemming from the practice and a court order barring Amazon from such violations in the future.

In a statement responding to Racine’s suit, Amazon spokesperson Maria Boschetti said the company revised its payment model for delivery drivers in 2019. In its earlier allegations, the FTC said Amazon only changed its payment model after the company learned that federal regulators were investigating the practice. (The 2019 changes, the FTC said at the time, appeared to largely revert the 2016 changes and provided more transparency to drivers about their earnings.)

“This lawsuit involves a practice we changed three years ago and is without merit,” Boschetti said. “All of the customer tips at issue were already paid to drivers as part of a settlement last year with the FTC.”

As part of the 2021 FTC settlement, Amazon agreed on a nationwide basis not to mislead drivers about their earnings, including tipped earnings, and to seek drivers’ explicit consent before changing how much of the customer tips they actually receive.