LOS ANGELES — Workers for grocery store delivery start up company Instacart recently settled their nationwide class action lawsuit against the company for $4.6 million, resolving more than 18 labor and wage allegations under state and federal laws. The settlement is unlikely to create much issue for Instacart, which recently acquired an estimated $400 million in investment capital, leading to a market valuation of almost $3 billion. According to reports, Whole Foods has invested $700 billion in the company.
In their lawsuit, the plaintiffs claimed Instacart improperly classified workers as independent contractors to avoid paying minimum wage and overtime pay, business expenses, and other benefits. The plaintiffs claimed they often earned below minimum wage by having to pay the cost of their own transportation as well as fees to use the company’s proprietary app to receive customer orders.
Instacart, like other companies in the so-called “gig economy” such as Uber and Lyft, rely on individuals with their own transportation acting as independent contractors to perform on-demand services. Instacart allows customer to use an app to purchase groceries from their local stores and have them delivered to their homes.
While the arrangement seems simple enough, Instacart workers claim the company engaged in deceptive and illegal business activities to keep employee wages low and avoid paying overtime. In addition to misclassifying workers as independent contractors, the plaintiffs claim Instacart engaged in illegal tip pooling and made it too difficult for customers to leave tips.
According to the class action unpaid overtime lawsuit, Instacart charged customers a “service fee” which many thought of as a tip that went to the delivery workers. Unfortunately for the plaintiffs, the service fee went to the company and many complained their wages took a significant hit. Although Instacart admits no liability in the settlement, it may learn from other companies relying on the gig economy and reform its labor policies to avoid future wage theft lawsuits with workers.
Independent Contractor Overtime Pay Lawsuit
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