Walmart has agreed to a $100 million judgment to settle allegations from the Federal Trade Commission and 11 states that the company caused on-demand delivery drivers to lose tens of millions of dollars’ worth of earnings by deceiving them about the base pay, incentive pay and tips they could earn.
Under a proposed order from a judge in U.S. District Court for Northern California, Walmart (NASDAQ: WMT) is also required to implement an earnings verification program to ensure drivers are paid promised earnings and tips.
The FTC alleged that Walmart showed gig workers in its Spark Driver delivery program inflated base pay and tip amounts. The complaint also alleged that Walmart deceived customers by falsely claiming that 100% of customer tips would actually go to drivers.
Walmart crowd sources drivers through the Spark app. Drivers select orders they want to deliver with their own vehicles and pick them up at Walmart stores. Workers decide whether to accept delivery jobs based on Walmart statements about the base pay and tips that a driver can expect to receive if they complete the assignment.
“Labor markets cannot function efficiently without truthful and non-misleading information about earnings and other material terms,” said Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection. “Today’s settlement reflects the Trump-Vance FTC’s focus on ensuring a healthy labor market for American workers, which is critical to the nation’s success.”
The FTC under Chairman Andrew Ferguson has partnered with other agencies to investigate anticompetitive labor practices that harm workers.
The complaint alleges that Walmart failed to notify drivers that, unlike the payment for the goods being delivered, the payment for the advertised tip amount had not been preauthorized, and therefore drivers would not receive that amount if the customer was unable to cover the cost of the tip or if the charge otherwise failed. The company also failed to inform drivers that it would split tips when a customer’s delivery was split across multiple drivers.
Another deceptive practice, according to the FTC, occurred when the company failed to inform drivers their base pay and tips would be reduced when it removed orders from “batched” orders, which involve delivering goods to multiple customers during one trip. In many instances, Walmart either failed to notify drivers at all about the change in base pay and tips or only notified them of the change in their earnings after they completed the delivery.
Walmart also misrepresented the incentive pay drivers can earn in exchange for completing certain tasks, according to the FTC. The company failed to disclose all the conditions that must be met to earn the promised incentive pay for completing certain tasks and denied the promised earnings on the basis that drivers failed to meet all the conditions. Walmart, for example, has offered to provide drivers a referral incentive when they refer new drivers to the service yet failed to adequately disclose that it will only pay the incentive if the newly recruited driver performed deliveries in a particular zone or for a particular store. Even when drivers meet the incentive conditions, Walmart sometimes fails to provide the promised incentive pay.
On multiple occasions, Walmart failed to provide collected tips to drivers as promised and didn’t refund the tip to customers.
The FTC said Walmart violated the FTC Act and the Gramm-Leach-Bliley Act. The court order also prohibits Walmart from modifying an offer for base and incentive pay or tips after the initial offer except under limited circumstances, such as when a driver failed to provide the required service or the customer cancels an order. The company also must not misrepresent earnings and other information included in the Spark delivery offers.
In a statement, Walmart said it values “the hard work and dedication of the drivers who deliver great service and products to our customers.” It added that it has issued payments to affected drivers and continues to make additional payments as appropriate.
“We are continuously improving procedures to ensure fairness and transparency for drivers,” Walmart said.
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
Write to Eric Kulisch at ekulisch@freightwaves.com.
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