Instacart settles benefits lawsuit for $5.25M

Instacart has reached a $5.25 million settlement with the city of San Francisco concerning payments to workers for health care and sick leave, according to an announcement by the city on Thursday.

The settlement was the result of an investigation by the San Francisco Office of Labor Standards Enforcement into Instacart’s compliance with the city’s Health Care Security Ordinance (HCSO) and Paid Sick Leave Ordinance (PSLO). The HCSO requires employers with 20 or more workers to spend a minimum amount on health care benefits per covered employee. The PSLO requires employers to provide sick leave to all employees in San Francisco.

The investigation follows the 2020 California ballot initiative known as Prop 22, which allows companies that employ gig workers to classify them as independent contractors who are therefore exempt from certain employee protections and benefits. That measure was ruled unconstitutional by a state court in 2021 but remains in place while under appeal.

In the meantime, some California cities have sued companies that employed gig workers before Prop 22 took effect, saying those workers should have been treated as regular employees under previous California law.

“We’re pleased to have reached an agreement with the City of San Francisco,” Instacart said in a statement provided to SN. “Instacart 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 customers across San Francisco while also protecting access to the flexible earnings opportunities Instacart shoppers consistently say they want.”

The city of San Francisco said the settlement will benefit more than 5,000 Instacart workers who made deliveries and provided services in San Francisco between 2017 and 2020. Most of the settlement, $5.1 million, will go directly to Instacart workers, and $150,000 will cover settlement administration, the city said.

“We hope this sends a strong message that the city aggressively investigates compliance with our labor laws and works hard to ensure workers are treated fairly,” said San Francisco Attorney David Chiu in announcing the settlement.

He noted this is the second largest settlement the city has reached with companies that employ gig workers, after a $5.325 million settlement reached with DoorDash over similar allegations in 2021.

Last year, Instacart agreed to settle a lawsuit with the city of San Diego for $46.5 million, after the city alleged that the company misclassified workers.

The issue of how workers are classified remains an ongoing dispute at both the state and national level, impacting workers not only at food delivery companies such as Instacart and DoorDash but also independent gig drivers for companies such as Uber and Lyft.

Last year the Labor Department published a proposal that would make it harder for employers to classify these workers as independent contractors, seeking to reverse rules put in place during the Trump administration, which in turn had reversed rules from the Obama administration regarding how employers can define contract workers.