Amazon agreed on Tuesday to pay $62 million to the Federal Trade Commission to settle charges that it withheld tips to delivery drivers over a two-and-a-half year period, in a case that highlights the federal government’s increased interest in gig-economy workers.
The F.T.C. said in an announcement that Amazon had promised its Flex delivery drivers that they would receive 100 percent of all customers’ tips. But starting in 2016, the F.T.C. said, Amazon secretly lowered the hourly delivery wages, which were advertised at $18 to $25, and tried to mask the smaller wages by using customer tips to cover for the smaller hourly pay. The net effect was that the contract workers received smaller overall take-home pay, the agency said.
The practice wasn’t disclosed to drivers but the Flex drivers noticed the compensation reductions and began to complain. Amazon stopped the practice in 2019, after it became aware of the F.T.C.’s investigation, the agency said. The company settled without admitting wrongdoing.
“Rather than passing along 100 percent of customers’ tips to drivers, as it had promised to do, Amazon used the money itself,” said Daniel Kaufman, the acting head of consumer protection at the F.T.C. “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.”
Flex workers are classified by Amazon as independent contractors and often use personal vehicles for deliveries of the company’s Prime Now and AmazonFresh items. Customers can give a tip to delivery drivers on the checkout page.
Amazon is facing greater regulatory scrutiny overall. The Seattle company is under investigation for antitrust violations amid growing concerns from lawmakers and regulators about the power of the big tech companies.
From NYT “Business Day” August 31, 2014 by Steven Greenhouse:
Week after week, Guadalupe Rangel worked seven days straight, sometimes 11 hours a day, unloading dining room sets, trampolines, television stands and other imports from Asia that would soon be shipped to Walmart stores.
Even though he often clocked 70 hours a week at the Schneider warehouse here, he was never paid time-and-a-half overtime, he said. And now, having joined a lawsuit involving hundreds of warehouse workers, Mr. Rangel stands to receive more than $20,000 in back pay as part of a recent $21 million legal settlement with Schneider, a national trucking company.
“Sometimes I’d work 60, even 90 days in a row,” said Mr. Rangel, a soft-spoken immigrant from Mexico. “They never paid overtime.”
The lawsuit is part of a flood of recent cases — brought in California and across the nation — that accuse employers of violating minimum wage and overtime laws, erasing work hours and wrongfully taking employees’ tips. Worker advocates call these practices “wage theft,” insisting it has become far too prevalent.
Some federal and state officials agree. They assert that more companies are violating wage laws than ever before, pointing to the record number of enforcement actions they have pursued. They complain that more employers — perhaps motivated by fierce competition or a desire for higher profits — are flouting wage laws.
Many business groups counter that government officials have drummed up a flurry of wage enforcement actions, largely to score points with union allies. If anything, employers have become more scrupulous in complying with wage laws, the groups say, in response to the much publicized lawsuits about so-called off-the-clock work that were filed against Walmart and other large companies a decade ago.
Here in California, a federal appeals court ruled last week that FedEx had in effect committed wage theft by insisting that its drivers were independent contractors rather than employees. FedEx orders many drivers to work 10 hours a day, but does not pay them overtime, which is required only for employees. FedEx said it planned to appeal.
Julie Su, the state labor commissioner, recently ordered a janitorial company in Fremont to pay $332,675 in back pay and penalties to 41 workers who cleaned 17 supermarkets. She found that the company forced employees to sign blank time sheets, which it then used to record inaccurate, minimal hours of work.
David Weil, the director of the federal Labor Department’s wage and hour division, says wage theft is surging because of underlying changes in the nation’s business structure. The increased use of franchise operators, subcontractors and temp agencies leads to more employers being squeezed on costs and more cutting corners, he said. A result, he added, is that the companies on top can deny any knowledge of wage violations.
“We have a change in the structure of work that is then compounded by a falling level of what is viewed as acceptable in the workplace in terms of how you treat people and how you regard the law,” Mr. Weil said.
His agency has uncovered nearly $1 billion in illegally unpaid wages since 2010. He noted that the victimized workers were disproportionately immigrants.
Guadalupe Salazar, a cashier at a McDonald’s in Oakland, complained that her paychecks repeatedly missed a few hours of work time and overtime pay. Frustrated about this, she has joined one of seven lawsuits against McDonald’s and several of its franchise operators, asserting that workers were cheated out of overtime, had hours erased from timecards and had to work off the clock.
“Basically every time that I worked overtime, it didn’t show up in my paycheck,” Ms. Salazar said. “This is time that I would rather be with my family, and they just take it away.”
Business advocates see a hidden agenda in these lawsuits. For example, the lawsuit against Schneider — which owns a gigantic warehouse here that serves Walmart exclusively — coincides with unions pressuring Walmart to raise wages. The lawyers and labor groups behind the lawsuit have sought to hold Walmart jointly liable in the case.
Walmart says that it seeks to ensure that its contractors comply with all laws, and that it was not responsible for Schneider’s employment practices. Schneider said it “manages its operations with integrity,” noting that it had hired various subcontractors to oversee the loading and unloading crews.
Business groups note that the lawsuits against McDonald’s have been coordinated with the fast-food workers’ movement demanding a $15 wage. “This is a classic special-interest campaign by labor unions,” said Stephen J. Caldeira, president of the International Franchise Association. In legal papers, McDonald’s denied any liability in Ms. Salazar’s case, and the Oakland franchisee insisted that Ms. Salazar had failed to establish illegal actions by the restaurant.
Michael Rubin, one of the lawyers who sued Schneider, disagreed, saying there are many sound wage claims. “The reason there is so much wage theft is many employers think there is little chance of getting caught,” he said.
Commissioner Su of California said wage theft harmed not just low-wage workers. “My agency has found more wages being stolen from workers in California than any time in history,” she said. “This has spread to multiple industries across many sectors. It’s affected not just minimum-wage workers, but also middle-class workers.”
Many other states are seeing wage-theft cases. New York’s attorney general, Eric T. Schneiderman, has recovered $17 million in wage claims over the past three years. “I’m amazed at how petty and abusive some of these practices are,” he said. “Cutting corners is increasingly seen as a sign of libertarianism rather than the theft that it really is.”
In Nashville last February, nine housekeepers protested outside a DoubleTree hotel because the subcontractor that employed them had failed to pay a month’s wages. “The contractor said they didn’t have the money, that the hotel hadn’t paid them,” said Natalia Polvadera, a housekeeper. “We went to the hotel manager — he showed receipts that they had paid the contractor.”
Nonetheless, the protests persuaded DoubleTree to pay the $12,000 in wages owed.
Mr. Weil said some executives had urged him to increase enforcement because they dislike being underbid by unscrupulous employers.
His agency has begun cracking down on retaliation against workers who complain, suing a Texas company that fired a janitor when he refused to sign a statement that falsely said he had already received back wages due him from a Labor Department investigation.
“This is just not acceptable,” Mr. Weil said. “You can’t threaten people to lose their jobs because they are asserting rights that go back 75 years.”