Walmart Agrees to $100 Million Settlement Over Delivery Driver Pay Allegations

Walmart Agrees to $100 Million Settlement Over Driver Compensation Practices

Retail giant Walmart has reached a $100 million settlement with the Federal Trade Commission and 11 states over allegations that it misled delivery drivers about their potential earnings, according to an announcement made Thursday.

The case centers on claims that Walmart deceived drivers in its Spark Delivery network about various aspects of their compensation, including base pay, incentive opportunities, and customer tips. The FTC alleges these practices cost drivers tens of millions of dollars in lost earnings since 2021.

A Walmart spokesperson confirmed to CBS News that the company has already begun issuing payments to affected workers and will “continue to make payments as appropriate.” The retailer did not explicitly admit wrongdoing as part of the settlement.

The FTC’s complaint outlines how Walmart’s Spark Program, launched in 2018, operates as a gig economy platform where independent contractors can sign up to make deliveries for Walmart and other participating retailers including Home Depot and 1-800-Flowers. Drivers typically decide whether to accept delivery “offers” based on earnings estimates displayed in the Spark app.

According to regulators, the crux of the deception involved Walmart’s failure to disclose crucial details about how drivers would be compensated. One significant issue involved tip allocation. The FTC alleges that when multiple drivers were assigned to complete portions of a single order, Walmart would display the full customer tip amount to each driver, creating the impression they would receive the entire amount. In reality, the company split the tip among all drivers involved in the order.

“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, in the agency’s statement.

The case highlights growing regulatory scrutiny of gig economy platforms and how they communicate compensation structures to workers. For Walmart, its delivery network represents a crucial component of its omnichannel strategy as it competes with Amazon and other e-commerce players.

The FTC complaint further alleges that the deception extended to customers as well. According to regulators, Walmart falsely claimed that 100% of customer tips would go directly to drivers, which was not always the case due to the company’s tip distribution practices.

Perhaps most damaging to Walmart’s reputation is the FTC’s assertion that the company was aware of these issues but took no action to address them. The agency contends that Walmart’s practices violated FTC guidelines, federal law, and several state laws.

The $100 million settlement represents one of the larger penalties imposed on a major retailer for labor practices in recent years. The agreement comes at a time when gig economy workers across various platforms have increasingly voiced concerns about transparency in compensation structures.

For Walmart, delivery services have become an increasingly important part of its business strategy as it seeks to leverage its vast network of over 4,700 U.S. stores to compete in the e-commerce space. The company has positioned its ability to quickly deliver groceries and other products from its stores as a key competitive advantage against pure e-commerce players.

The settlement underscores the importance of transparency in the rapidly evolving gig economy landscape, where workers often make decisions based on earnings estimates provided through digital platforms. As regulators continue to examine these business models, companies may face increasing pressure to ensure their compensation disclosures are comprehensive and accurate.

Walmart’s $100 million settlement will provide compensation to affected drivers, though the precise distribution mechanism and individual payment amounts were not immediately disclosed.