Recycling.

yes I remove the lids. It is because they are different type of plastic and it slows down the process if you leave them on. Someone has to remove them manually or they might even end up in general waste and not get recycled.

I think it depends on your particular Local Authority. As for 'for lid on, flatten' surely it's easier to do so with the lid off? Perhaps if the item isn't completely empty the company might be sued for damage caused by spillage if the person is very litigious?