Instacart agreed to pay $46.5 million to settle a 2019 lawsuit filed by the city of San Diego that claimed the company misclassified workers, city attorney Mara Elliott said Monday.
The city's lawsuit sought to recoup money for 308,000 individuals — who worked for the grocery delivery service in California from September 2015 through December 2020 — because they were misclassified as independent contractors instead of employees.
The money will be distributed based on the number of hours each individual worked during that period. The settlement also includes more than $6 million in civil penalties that will go to a fund for the enforcement of consumer protection laws.
The San Francisco company operates a digital platform where Instacart workers, or "shoppers," pick up and deliver groceries for customers. As a result of this settlement, thousands of Instacart workers will receive some money for expenses they paid for gas and car maintenance, their cellphones and other equipment.
"We are pleased to get justice for these delivery workers," Elliott said in the announcement. "My office will continue our fight for the rights of workers statewide. We hope other gig-economy companies will also do right by their workers."
Instacart said the settlement is not an admission of wrongdoing.
"Instacart has always properly classified shoppers as independent contractors, giving them the ability to set their own schedule and earn on their own terms," the company said in an emailed statement. "We remain committed to continuing to serve our customers across California while also protecting access to flexible earnings opportunities for Instacart shoppers."
The lawsuit — the first of its kind — was filed in September 2019 with the San Diego Superior Court before the pandemic began. The settlement enforces the benefits and protections that companies must provide to workers who are classified as employees following a decision established by the state's Supreme Court. It became a state law in 2020 through Assembly Bill 5.
Lorena Gonzalez Fletcher, chief officer of the California Labor Federation, was the driving force behind Assembly Bill 5 when she served as an Assembly member.
"I'm just super excited that workers are going to see money in their pocket that they earned," she said in a phone interview with the Union-Tribune on Tuesday.
While Gonzalez Fletcher sees this as a win for workers, she said there are still challenges to full enforcement of this regulation since Proposition 22 was passed.
Proposition 22 was a 2020 ballot measure that was approved by voters and gives gig-economy companies — like Uber, Lyft, DoorDash, Postmates and Instacart — an exception to Assembly Bill 5 by classifying their drivers as "independent contractors" instead of "employees."
When workers are classified as "employees" it means companies are required to provide certain benefits such as minimum wage and overtime pay. The companies also must pay into Social Security and make contributions to unemployment insurance.
On Tuesday, the Biden administration announced a proposal that would make it possible for gig workers to be reclassified as employees rather than contractors.
Gonzalez Fletcher said she is hopeful that this move at the federal level will help with the enforcement of these benefits and protections for people who work for large corporations.
