Amazon Faces Lawsuit Over $350M Misused 401(K) Funds

HIGHLIGHTS:

• Amazon faces a new lawsuit for misusing $350 million in forfeited 401(k) funds.
• The plaintiff, employee Cory Curtis, accused Amazon of self-dealing and breaching its duties of loyalty and prudence.
• Amazon is also dealing with a series of class action lawsuits in California and Florida.

Retail giant Amazon is facing a class action lawsuit again, this time over allegedly misusing $350 million in forfeited 401(k) funds.

The lawsuit was filed by its employee Cory Curtis in a federal court in Seattle, Washington on Monday. The lawsuit aims to represent some 20,000 Amazon employees who are also participants of 401(k).

In the lawsuit, Curtis accused Amazon of self-dealing and breaching its duties of loyalty and prudence, as outlined under the federal Employee Retirement Income Security Act of 1974 which governs employee benefit plans.

Curtis claimed that Amazon did not use the money to cover the plan’s administrative fees which totaled $18 million during the same period. Instead, the funds were wrongly allocated to reduce its matching contributions.

Following the announcement, shares of Amazon on the stock market declined by 0.86 percent on Tuesday.

What is 401(k)?

A 401(k) is an employer-provided retirement savings plan that allows employees to defer a portion of their salary into an investment account. It will remain owned by the employee even after leaving the company.

Under Amazon’s 401(k) plan, savings will become fully vested to employees after their three years of service.

Between 2018 and 2023, plan participants who did not fully vest forfeited about $349 million in matching funds.

Other lawsuits

Besides 401(k), Amazon is also dealing with a series of class action lawsuits in California and Florida.

Just recently, customers of Amazon revived their fight against the retail company over allegedly taking advantage of the COVID-19 pandemic to inflate prices of necessities.

The lawsuit also criticized Amazon founder Jeff Bezos, whose personal wealth dramatically increased by $205 million per day during the period.

According to the lawsuit, Amazon’s alleged price gouging violated Washington’s anti-price gouging laws, saying that it was not only immoral but also illegal.

In addition, the plaintiffs claimed that the international retailer could have better prepared for and dealt with price gouging on its website but Amazon’s failure to do so amounted to negligence and unjust enrichment.

The lawsuit represented consumers nationwide who paid higher prices on Amazon during the Covid-19 pandemic, and was seeking damages and a court order to put a stop to price gouging.

In Florida, it is also facing a lawsuit by a mother who claimed that Amazon charged her $99 for 36 rolls of toilet paper and $199 for two bottles of hand sanitizer.