Amazon.com (AMZN, Financials) agreed to a $3.95 million settlement with the District of Columbia to resolve a lawsuit alleging the company misled customers about how it distributed tips to its Flex delivery drivers.

The District's Office of the Attorney General charged Amazon with promising consumers that 100% of their tips would go to drivers while devoting some to help down its own labor expenses. The corporation had already paid impacted drivers a separate settlement via the Federal Trade Commission.

Agreements call for Amazon to pay the District $1.5 million in litigation expenses and $2.45 million in penalties. The corporation also has to disclose any upcoming adjustments to its tipping policy.

“When companies mislead customers to boost their profits by stealing tips intended for their workers, they are cheating their consumers, their employees, and their competitors who play by the rules,” said DC Attorney General Brian Schwalb.

Amazon debuted its Flex program in 2015, letting independent workers deliver goods. Consumers were urged to give gratuities, which the business first assured would be sent straight to drivers. But in 2016, Amazon changed its pay structure and used some of those tips to offset basic pay without not telling consumers.

Filed in 2022, the complaint claimed that Amazon misled consumers into believing their gratuities were raising drivers' wages, therefore violating DC's consumer protection laws. The District sought more fines outside of the FTC settlement, claiming that compensation by itself would not stop future misbehavior.

Amazon has to maintain openness about its tipping policies as part of the settlement; if any of the tips are used for uses other than direct driver pay, they must be clearly posted on its website and app.