It was just a few weeks ago that Amazon launched its Amazon Prime Now service in Los Angeles and several other metropolitan areas, promising customers one- and two-hour delivery for tens of thousands of products.
On Tuesday, four former Amazon Prime Now drivers in Southern California sued the online retail behemoth, claiming the labor model behind the service is a sham. The drivers had made deliveries for roughly a month before they filed their complaint, which alleges violations of minimum wage and overtime pay laws.
The lawsuit provides yet another glimpse at how Amazon keeps its prices low in part by shaving labor costs deep down in its logistics network.
The drivers named in the complaint were not actually Amazon employees. Rather, they were “independent contractors” working on behalf of a courier service called Scoobeez, which the lawsuit indicates has a contract with Amazon. Since the drivers don’t work for Amazon, the retailer doesn’t have to worry about paying payroll taxes, workers’ compensation costs or unemployment insurance taxes on them.
And since the workers are independent contractors, Scoobeez doesn’t bear those costs, either. The drivers must cover their own work-related expenses, including providing their own vehicles and gasoline. Therein lies the claim that the Amazon-Scoobeez arrangement runs afoul of labor law: After paying their own automobile expenses, the drivers say their wages fell below California’s minimum wage of $9 per hour. They also claim they were not paid the required time-and-a-half rate when they worked more than eight hours a day.
The suit argues that the drivers are, in fact, employees of Scoobeez, not independent contractors, as they’ve been classified.
The drivers were working for hourly pay, as opposed to the per-delivery rate that’s common in the courier industry, according to the suit. Beth Ross, the attorney who filed the case, says the drivers typically logged at least 50 miles per day on their cars, often reaching or exceeding 100 miles. After subtracting the cost of gasoline and wear and tear on the automobiles from the $11-per- hour wage, Ross says the pay came out to roughly $60 for 8.5 hours of work on some shifts, or approximately $7 per hour.
“They are being paid a sub-minimum wage, and Amazon knew that,” Ross told The Huffington Post. “And they’re giving away the service for free to customers. Well, guess who’s paying for it? Down-and-out, down-on-their-luck low-wage workers with no other job opportunities.”
(Note: The Amazon Prime Now service is free for Prime members requesting a two-hour delivery; it costs $7.99 per order for one-hour delivery, with a $15 minimum order. The Prime service itself costs $99 per year.)
An Amazon spokeswoman said the company does not comment on pending litigation. A message left for Scoobeez, which was named as a co-defendant in the suit, was not immediately returned.
The independent contractor scheme is a cost-saving arrangement that already facilitates many Amazon Prime deliveries, as HuffPost detailed last year in a story about the Amazon contractor Lasership. Many of that company’s drivers said they earned so little after expenses that a car breakdown would put them out of business.
The use of independent contractors is fast becoming the norm in trucking and delivery services nationwide, since it saves companies so much money. FedEx is widely credited with pioneering the independent contractor model, and the delivery giant has been fending off related lawsuits from drivers for years. Ross successfully sued FedEx on behalf of drivers in a closely watched case that was settled earlier this year for $228 million.
In addition to the minimum wage and overtime claims, the Amazon Prime Now lawsuit also accuses the company of breach of contract. The Amazon Prime Now app allows customers to leave a tip for their courier, but Ross alleges that the four drivers did not receive all their tips.
“This is brand-new ground for Amazon,” Ross said of the Prime Now service. “They have the opportunity to make it right before this becomes a very entrenched business practice. They can set themselves apart from the rest of so-called sharing economy.”