Instacart Settles California Misclassification Lawsuit

San Francisco, CAInstacart is settling a misclassification complaint claiming that the gig company violated the California labor code by misclassifying its workers, known as “shoppers” as independent contractors instead of employees. (Shoppers gather groceries in stores for customers and sometimes deliver them.) The city of San Diego claimed Instacart misclassified its shoppers as independent contractors in order to avoid paying them benefits.

Mara W. Elliott, city attorney for San Diego said in a news release that the settlement involves about 308,000 individuals who worked for the grocery delivery platform from September 2015 through December 2020. The city of San Diego in 2019 filed a complaint against the gig giant claiming that it was sidestepping benefits owed to its shoppers and violating the Unfair Competition Law by classifying them as independent contractors, who aren't entitled to several legal protections and benefits, including minimum wage, overtime pay and paid sick time, reported Law360.

Instacart Lawsuit and Dynamex

The city attorney's lawsuit followed a state high court ruling in 2018 in Dynamex Operations West Inc. v. Superior Court that set forth the standards for determining whether a worker is an independent contractor or an employee under California law. Later, that standard from Dynamex was codified in Assembly Bill 5. (Under the Dynamex test, an employer must show that the worker is free from control and direction of the employer; performs work that is outside the usual business of the employers; and customarily does the same work as an independent business.)

The city argued that Instacart couldn't meet the burden under Dynamex's ABC test to show that its full-service shoppers are independent contractors.

Instacart Settlement

The settlement funds will be allocated to Instacart workers based on the number of hours each "shopper" worked over those five years – for workers who were most active, payments could be thousands of dollars. Workers were responsible for maintaining and fueling their personal vehicles, using their own telephones, and paying for other equipment, including personal protective equipment against COVID-19. The settlement covers all those expenses and other costs that could be categorized and measured.

As part of the deal, Instacart is required to abide by Proposition 22 — which carves out certain workers from a three-part worker-classification test — in connection with any engagement of shoppers for a period of at least two years from the effective date of the settlement, or as long as provisions of the law applicable to Instacart remain valid and enforceable in the state of California. 

Instacart noted that the lawsuit was filed prior to the start of the COVID-19 pandemic and before California voters chose “their preference for an independent contract model” — referring to Proposition 22 in California, which voters approved in 2020. In August 2021, a California judge ruled that parts of Proposition 22 were unconstitutional and that the measure in its entirety was unenforceable. Proponents have said they plan to appeal the ruling.

Instacart has denied any wrongdoing and maintains that it properly classified its workers at all times. In a statement and reported by CBS8, Instacart said it was pleased to have reached an agreement with the city of San Diego, and that the company has always properly classified shoppers as independent contractors, "giving them the ability to set their own schedule and earn on their own terms."

"We remain committed to continuing to serve our customers across California while also protecting access to flexible earnings opportunities for Instacart shoppers.”

The case is The People of the State of California v. Maplebear Inc., case number 37-2019-00048731-CU-MC-CTL, in the Superior Court for the State of California, County of San Diego.

About Instacart

The grocery and delivery company, founded in 2012, operates in the U.S. and Canada. Offering same-day grocery delivery, customers use the app to place grocery orders, which are then purchased and delivered by a “shopper” who drives the order directly to their home. Instacart launched its service in the city and county of San Diego in mid-2016 and has built up a “strong presence” in the area, attorney Elliott said.