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Instacart Settles Worker Rights Class Action Lawsuit for $4.6M

By George Khoury, Esq. on March 29, 2017 | Last updated on March 21, 2019

A common trend amongst the sharing economy employers is to avoid the legal complications of having a regular workforce. However, avoiding legal complications often results in legal battles. Fortunately, for Instacart, the class action that could have potentially reclassified their workforce from independent contractors to employees has settled without upsetting the burgeoning app's status quo.

The Instacart workers were seeking relief for numerous alleged violations of labor codes, including a failure to reimburse expenses, tip pooling, and a lack of a grievance procedure when a worker is deactivated. Under the settlement, the three lead plaintiffs will each receive $5,000, while other workers in the class will receive $500 to $1000 each.

What Is Instacart?

Instacart is an online, app based service, that allows users to shop locally from the comfort of their own home, and have their purchases brought to them instantly, or more accurately, within a matter of hours. The service is able to accomplish this by allowing nearly anyone to sign up to be a worker. When an Instacart worker receives an order, they are paid based on the size of the order they must deliver. How does the app do this? Simple, the app charges a delivery fee to users, or provides a monthly or annual subscription model. Also, the app charges above retail price for some of the items it sells. A Instacart worker in San Francisco makes $1.50 per drop off, plus a $0.25 commission per item.

Settling for Changes to Instacart's Service

Not only does the settlement contain financial terms, the company must allow comply with a few non-monetary terms. Among the most important for term for the workers involves the app providing a clearer explanation to customers/users that the service fee is not a tip. Also, the terms require Instacart to provide their workers clear guidelines on what sort of conduct will result in a worker's deactivation from the Instacart system, as well as provide a grievance/appeal process.

From the perspective of Instacart, this settlement is incredibly important. As an emerging service based company that is still relatively new in the market, requiring them to reclassify their employees could have had catastrophic effects on the company's bottom line.

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