Grocery delivery service Instacart announced today that it will allow its personal shoppers in some cities the ability to switch from contractor to employee status. The company says it was already experimenting with shoppers working as part-time employees in Boston as part of a pilot trial, and it will now roll out that program to Chicago, with other cities to follow in the future.
The decision follows a change to Instacart’s business model, which before saw its workers both picking up the customer order in the store as well as delivering it. But in recent months, the company split the two job roles – now there are shoppers who prepare orders in the stores, and others who are tasked with actually delivering the items to the customer.
It’s only the personal shoppers who will be offered the option to switch to employee status, however – the drivers will still work as independent contractors. Apoorva Mehta, Instacart founder and CEO, argues that the personal shoppers have specialized skills and require training, which is why they’re being shifted to employee status.
“As Instacart grows, and we continue to learn what makes the best experience for our customers, we are constantly looking for ways to improve our service,” said Mehta. “When you look at the difficulty of shopping, picking and delivering items such as fruit or eggs that need to be carefully selected, you realize that grocery shopping can be complicated. For this reason, we want to provide supervision and training, which can only be done with employees.”
Instacart says that, based on data collected during its Boston trial, it expects that over three-fourths of its in-store contractors will choose to become part-time employees. These employees, who prepare orders for customers from stores like Whole Foods, Costco, Petco, and others, will work between 20 and 30 hours per week, and will make above minimum wage.
Wages will vary by market for the part-time employees, the company tells us, but it plans to be competitive in each market in order to attract and retain shoppers. Instacart uses an hourly minimum to ensure shoppers are paid for their time and effort, regardless of customer volume, and they have the opportunity to make more than that. The hourly floor is above local minimum wage, in all regions, the company confirms.
The company today has over 7,000 shoppers working across 16 cities in the U.S., where customers can shop for groceries and other items from retail chains using a mobile app.
The announcement comes at a time where there is increased focus on companies operating in the “on-demand” economy, including Uber and Lyft, which have historically relied on contractor labor to power their businesses. The companies have argued that, by using contractors, the workers have more flexibility with regard to setting their schedules. It also allows them to pick up other jobs from similar on-demand companies, as well. But contractors don’t have the same protections as employees, including benefits like health insurance, unemployment, Social Security, worker’s comp and more.
Providing these protections will cut into the business’s bottom line, as will be the case with Instacart. The company says the biggest cost increases it will incur are related to worker’s compensation and payroll taxes.
Current laws haven’t caught up to the shift to the changing business models of the on-demand economy, but it’s becoming clear that they will need to be defined. Just last week, the California Labor Commission ruled that one of the company’s drivers was an employee – but the ruling did not set a precedent – it only applied to a single employee. However, it did point to the fact that the way these companies classify employees (and then financially benefit from that) is a potential vulnerability for these businesses.
In an announcement, Instacart says the option to change to employee status is arriving today in Chicago, following the earlier tests in Boston, and will then roll out to “some of the other cities it serves” in the coming months.