Walmart agreed Thursday to a $100 million settlement to resolve allegations that the company violated federal and state competition laws by misrepresenting how drivers for its San Bruno-based delivery service would participate in customer tips and delivery fees.
The settlement accompanied a complaint filed in federal court in San Francisco by the U.S. Federal Trade Commission, 10 states and the Alameda County District Attorney’s Office. The settlement is subject to approval by the court.
The plaintiffs alleged that Walmart misrepresented how much drivers would earn through tips, base pay, and incentives for deliveries, causing drivers to lose millions of dollars in expected earnings. At issue were a number of practices that caused drivers to believe they would be paid more for trips than they were actually paid.
According to the terms of the settlement agreement, $79 million (including sums already paid) will be used to pay drivers. Eleven million will be paid to the states and Alameda County. The remainder will be directed to the FTC and used for driver reimbursement.
A statement from Alameda County District Attorney Ursula Jones Dickson said that California drivers will receive in excess of $1 million from the settlement. The District Attorney’s Office has a consumer protection operation and has previously sued Walmart and other large retailers on environmental matters.
The settlement was the result of an investigation into the manner in which Walmart paid drivers who drove for Spark Driver, a so-called “last mile” delivery service owned and operated by Walmart. Spark is operated from Walmart’s Global eCommerce headquarters in San Bruno.
“Walmart executives knew drivers were not receiving the tips that Walmart advertised in their offers, but for years refused to address the issue.”
The complaint alleges
Spark drivers are independent contractors — gig employees — who bid for the opportunity to make deliveries for the company.
Spark was started by Walmart in 2018 in order to deliver groceries and other products to customers at their homes. Unlike delivery services such as DoorDash or Uber Eats, customers do not order through Spark, but directly from Walmart. Walmart then fulfills deliveries by using the Spark platform to offer deliveries to independent drivers on a competitive basis.
According to a Walmart release in 2022, “We now have thousands of independent contractors who choose to drive on the Spark Driver platform, making it the largest delivery provider for Walmart. Today, nearly three-quarters of delivery orders have been fulfilled by drivers on the Spark Driver platform — reaching 84% of U.S. households.”
The complaint alleges that drivers decide whether to accept delivery offers after being shown a screen that advises what they will make from the delivery. The complaint identifies a number of areas where drivers were paid less than they expected as a result of Walmart’s practices.
The challenged practices include Walmart quoting that a driver will receive a full tip when it is actually split among drivers each delivering part of an order, or that the driver will receive a full tip for a group of batched deliveries when one or more of the deliveries is later removed from the batch.
Walmart also allegedly misrepresented the amounts drivers would receive when Walmart doesn’t collect the expected tip from a customer.
In addition to the dispute concerning tips, the complaint identified misrepresentations in the calculation of “base pay” and “incentive earnings” that drivers would be paid for a delivery.
The complaint alleged that “Walmart executives knew drivers were not receiving the tips that Walmart advertised in their offers, but for years refused to address the issue.”
In addition to the monetary component of the settlement, Walmart agreed to an injunction against the disputed practices and to operate an “earnings verification program” that will check whether drivers are receiving what is represented to them. Walmart will report to the FTC for the next 10 years on the operation of the settlement.
The complaint and settlement have been assigned to U.S. Magistrate Laurel Beeler of the U.S. District Court for the Northern District of California.
According to court records, no hearing has yet been set for the court’s consideration of the settlement.