Instacart settles a class action suit for $4.6 million

You're an independent contractor! You're an independent contractor! You're an independent contractor!

Instasettlement. Earlier this month, we wrote about a Reddit user who got an accidental glimpse into Instacart’s pricing system. In addition to all the in-store markups, which added 40 percent to the bill, the user stumbled upon an odd company policy: in September, the app’s creators swapped out its traditional tipping system for a blanket 10 percent “service fee.”

Turns out, that service fee doesn’t go directly to the Instacart shopper (an independent contractor) who buys your groceries. Instead, it functions as a kind of cross-country tip pool: it’s redistributed across all the shoppers in the network. Instacart has said the service fee allowed it to pay people more, but it didn’t really disclose how that worked after it made the change. That pissed off some of the company’s high-performing shoppers—a few of whom showed their pay stubs to Buzzfeed, alleging a 30 to 40 percent drop in pay. As the Reddit user pointed out, Instacart app users did have the opportunity to forgo the service fee in exchange for (or in addition to) a traditional tip, but that option wasn’t made obvious at checkout.

(By the way, there are other reasons Instacart may have wanted to add the fee that have nothing to do with redistribution of pay. As Jason Del Rey at Re/code points out, companies typically count service fees as revenue, whereas tips don’t count. So to investors, it’d look like an automatic 10 percent boost in profit. An Instacart spokesperson refused to confirm with Del Rey.)

In a class action lawsuit settled last week, workers alleged the service fee gave Instacart more control over their wages.

So, the workers filed a class action lawsuit, alleging that the service fee gave Instacart more control over their wages, which should have classified them as “employees,” not independent contractors.

Instacart has some pretty real incentives to classify people as self-employed. If the company hired actual employees, it would be responsible for all the things companies with employees are responsible for, like paying for business expenses, offering workers’ compensation, insuring a minimum wage, and providing reasons for firing (in dystopian instaspeak, “deactivating”) people. The independent contractor/employee debate is central to recent critiques of the gig economy (and a big part of the reason why Uber drivers have joined the Fight for $15).

Re/code reports the suit was settled last week to the tune of $4.6 million. Three of the named plaintiffs will receive $5,000 each, and other workers will get less—in some cases, as little as a couple hundred dollars. Instacart will continue to be able to hire people as independent contractors.

There are a few bright spots for workers, though. In June 2015, Instacart started classifying people who shop, but don’t drive, on behalf of the company as actual employees. The settlement also requires that Instacart implement more transparent in-app language about service fees and tipping. And the company will have to give reasons for “deactivating” people.

But as Del Ray has been reporting for the last several months, Instacart seems to change its compensation policies as often as it changes its shoes. In the last few years, it has repeatedly announced major pay cuts for the people working on the ground, even as it’s raised more revenue and been valued at $3 billion. Last September, it reserved the right to change people’s base pay as often as once a week.

Del Ray sees Instacart’s compensation practices as a way to burden its workers with the cost of fluctuations in business. “The pay structure —  what Instacart refers to as ‘dynamic’ pay — feels like essentially outsourcing the risk associated with the volatility of its business …. to its workers,” he writes.

“Gig” is just another word for everything to lose.

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H. Claire Brown is a senior staff writer for The Counter. Her work has also appeared in The Atlantic, The Guardian, and The Intercept and has won awards from the Society for Advancing Business Editing and Writing, the New York Press Club, the Newswomen's Club of New York, and others. A North Carolina native, she now lives in Brooklyn.