Instacart has agreed to settle a suit covering about 308,000 workers whom the company misclassified as independent contractors in violation of California’s labor code for a total of $46.5 million. The affected individuals worked for the grocery delivery service as “shoppers” between September 2015 and December 2020. The case is The People of the State of California v. Maplebear Inc., case number 37-2019-00048731-CU-MC-CTL, Superior Court for the State of California, County of San Diego.
The settlement deal provides that without admitting any liability or wrongdoing, Instacart will pay no less than $37 million to the shoppers from the settlement fund. Instacart also will pay no more than $250,000 to cover the initial administration costs. In addition, the San Diego City Attorney’s office will receive $6 million in civil penalties.
The city of San Diego filed this lawsuit against Instacart in 2019, alleging that the company was depriving its shoppers of employee benefits and violating the Unfair Competition Law by classifying them as independent contractors. While employees are entitled to benefits and legal protections incidental to their employment, including minimum wage, overtime pay, and paid time off, independent contractors enjoy no such benefits.
The city’s lawsuit followed the California Supreme Court ruling in Dynamex Operations West Inc. v. Superior Court, which articulated the worker classification three-part test later codified in Assembly Bill 5. Under this test, a worker is an independent contractor if they are free from the employer’s control and direction, perform work outside the employer’s usual business, and customarily do the same work as an independent business.
Instacart moved to compel arbitration, but the court denied its motion. The court also granted a preliminary injunction requested by the city to stop the company from continuing to classify shoppers as independent contractors. In response, Instacart appealed. During the pendency of the appeal, California voters passed Proposition 22, which excludes certain workers from a worker-classification test to discern whether workers should be classified as employees or independent contractors. As a result, the Fourth Appellate District reversed the injunction.
After the appellate court lifted the injunction, Instacart again moved for arbitration, but the court denied its request, finding that there was no enforceable agreement between Instacart and its shoppers. Again, Instacart appealed, but the Fourth Appellate District affirmed the lower court’s decision denying arbitration before the parties finally settled.
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