By Leah Nylen and Jaewon Kang, Bloomberg
Walmart Inc. agreed to pay $100 million Thursday to settle a lawsuit by the US Federal Trade Commission and a group of states alleging the company withheld tips and misrepresented wages to drivers who deliver orders as part of its Spark program.
In a complaint filed in California federal court, the consumer protection agency said the company misled drivers about how it calculated their base pay, tips and special “incentive” earnings opportunities. The company also didn’t tell customers that tips wouldn’t be fully paid to the person who made their delivery, the lawsuit alleges.
Eleven states including Arizona, California and Illinois joined the FTC’s complaint and settlement.
A Walmart spokeswoman said the company has issued payments to affected drivers and continues to make additional payments as appropriate. Walmart is continuously improving procedures to ensure fairness and transparency, she said.
Walmart’s e-commerce business has been among the engines of growth in recent years, helping catapult the company’s market capitalization to $1 trillion.
While the retailer has long sought to broaden its digital footprint, that effort began hitting strides during the pandemic when households turned to online delivery for convenience. Walmart’s online operations grew 24% globally and exceeded $150 billion of sales last year, with consumers increasingly paying up for faster options.
To expand its digital operations, Walmart has been offering various types of delivery services from early-morning to pharmacy delivery. It began delivering Ozempic and other refrigerated prescriptions last fall.
Spark drivers, who are independent contractors, accept orders from Walmart and drop them off at customers’ homes.
“Labor markets cannot function efficiently without truthful and non-misleading information about earnings and other material terms,” Christopher Mufarrige, the head of the FTC’s Bureau of Consumer Protection, said in a statement.
The lawsuit is the latest by the FTC to seek compensation for gig-economy workers who were allegedly misled about employment terms. In 2021, the agency sued Amazon.com Inc. for withholding tips from drivers who worked for the company’s Flex program. Amazon agreed to pay more than $60 million to reimburse drivers. Three years later, the FTC and Illinois sued Grubhub Holdings Inc. for allegedly deceiving diners about delivery costs and misleading delivery drivers about potential earnings. The company agreed to pay $25 million to resolve the case.
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