Instacart To Pay $4.6M, Revise Service Amount Description To Resolve Class Action Lawsuit

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Back in 2015, and again last year, Instacart shoppers took their growing ire over worker classification, as well as tip and service amount changes, a step farther by suing the grocery delivery startup claiming it broke state and federal labor laws, the company has agreed to settle the class-action suit for $4.6 million.

Recode reports that the settlement resolves workers allegations [PDF] that Instacart improperly classified shoppers as independent contractors to avoid paying overtime, reimbursements for work-related expenses, and a regular wage at or above minimum wage, as well as claims that a change to tips dramatically lowered their take-home pay.

While the settlement doesn’t reclassify workers, it does provide some compensation for shoppers and requires Instacart to revise the description of the new service amount fee.

Under the proposed deal, the three workers who were actively involved in the lawsuit will receive $5,000 each, while other named parties will get between $500 and $1,000 each. Those not named in the suit will likely receive a few hundred dollars, reports Recode.

Instacart is also required to revise the way it describes the new service fee in order to provide more information to customers about what the fee is actually used for, as well as outlining the difference between the fee and a tip.

Additionally, the company must create a formal policy that explains under what circumstances a worker can be deactivated from the Instacart system, reports Recode.

“We have settled a nationwide class action lawsuit, primarily over the classification of our shoppers as independent contractors,” a rep for Instacart said in a statement. “This is a positive, early resolution for the Company, and we look forward to finalizing the settlement.”

The lawsuits —  the first of which was filed in 2015 and sent to arbitration and the second filed [PDF] in Dec. 2016 — centers on Instacart’s employment structure.

Instacart, like many other companies in the sharing economy, hires workers as independent contractors. Customers use Instacart to place orders for groceries at hundreds of different retailers. These orders are then fulfilled, and delivered by the shoppers.

The workers claimed in the lawsuit that this independent contractor classification is not accurate, as they are effectively treated like employees of the company.

These workers alleged that, like wage-earning employees, they must make themselves “available to perform work within a predetermined range of time each day” but that they are not properly compensated for those hours because of their contractor classification.

In order to work for Instacart, shoppers are required to use their own vehicles, pay for gas, maintenance, and other driving expenses. Additionally, the company — which is based around a smartphone app — requires workers to use their own phones and data from their personal cellular plans in order to receive and carry out their work orders.

To add insult to injury, the suit claimed, Instacart even charges shoppers $0.25 per order they fulfill for “their use of the ‘proprietary ‘Instacart Shoppers’ app.’”

As for the issue of wages, the lawsuit alleged that Instacart advertised it would pay workers “up to $25/hour” despite having no information that workers would earn those funds consistently. Instead, shoppers regularly earned below minimum wage.

In the same vein, the suit also took aim at Instacart’s recent tip changes. Back in September, the company announced it would ditch tips altogether in favor of a “service amount” that would be split between all workers.

While the company reversed course a month later, keeping both the traditional tip option and new service amount, shoppers said the change had dramatically lowered their take-home wages and confused customers.

The suit claimed that Instacart’s service amount redistribution to shoppers who don’t “customarily and regularly receive tips constitutes an illegal tip pool in violation of the Fair Labor Standards Act (FLSA) by causing shoppers’ hourly wages to fall below the federal minimum wage.”

The Dec. 2016 lawsuit was not the first worker lawsuit against Instacart for misclassification of employees. In 2015, shoppers filed a similar lawsuit that was eventually ordered to arbitration.