Grocery delivery company Instacart—one of Silicon Valley’s
fastest-growing upstarts in the emerging on-demand economy—is giving its army of personal shoppers the chance to become actual employees of the company.
Instacart says it is rolling out the option to become part-time employees to its shoppers in Boston and Chicago beginning today. Until now, Instacart’s shoppers all worked as independent contractors. Workers in more cities will get the same option in the coming months, the startup said.
Workers who choose to convert from contractor status to part-time will get workers’ compensation, and Instacart will pay for their unemployment, Social Security, and Medicare taxes, according to the company. But Instacart says employees will still have flexibility when it comes to picking their own shifts—a key selling point in attracting workers. The company also says it will not impose a minimum number of hours of work for its new part-time employees, though it will cap their number of hours worked per week to keep them below the full-time threshold.
“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,” says Instacart CEO Apoorva Mehta. “For this reason, we want to provide supervision and training, which can only be done with employees.”
Worker Unrest
Instacart’s announcement comes at a time when on-demand companies like Uber, Lyft, Postmates and others are surging in popularity and reach, creating a vast pool of cheap and flexible labor.
According to the nonprofit Freelancers Union, 53 million Americans now work as freelance contractors—about one in three US workers. By 2020,
according to estimates by software company Intuit, freelancers will make up as much as 40 percent of the US labor force—and on-demand workers are set to represent a significant chunk of those workers.
But some on-demand workers are finding the seeming freedom offered by their jobs comes at a cost. Some discover that they don’t
end up enjoying the flexible hours or wages the’ve been led to expect. Others have discovered that having to
manage their own equipment for the job, such as paying for gas and vehicle maintenance and factoring in depreciation costs, can be expensive. And if equipment gets damaged or contractors get hurt and can’t work, they lose the chance to make money.
This lack of security has led to calls that on-demand companies hire their workers as true employee status and take on the additional costs that come with that status. But so far, the issue is only being settled on a case-by-case basis under laws that can
vary state to state. Just last week, the
California Labor Commission found that a San Francisco-based driver for Uber should be considered an employee of the company, possibly providing more ammunition for numerous lawsuits already working their way through the courts that seek to establish that on-demand workers are being misclassified—including a
suit against Instacart.
Giving Workers a Choice
Most on-demand companies seem loath to convert their thousands of independent contractors to employees because of costs that could run to
tens of thousands of dollars per worker. And those costs could mount quickly as well-funded startups seek a steady stream of workers to expand and scale quickly to meet investors’ expectations.
According to
calculations by the National Employment Law Project, businesses stand to save up to 30 percent of their payroll tax costs by choosing to classify workers as independent contractors—savings they could use to underprice the competition and, some say, enjoy an unfair competitive advantage.
All of which makes Instacart’s decision all the more intriguing. The company says that giving workers the choice to become employees is not in response to the growing swell of regulatory questions swirling around the on-demand economy. Rather, it says, it wants to improve customer experience.
One of the basic tenets of being an independent contractor is that companies can’t provide employee training, an inconvenience that some companies are trying to create workarounds for. (Uber, for one,
recently released a video game to recruit more drivers onto its ride service platform and provide cursory training of the ins and outs of San Francisco.) But Instacart is saying that training is key to doing better by its customers.
Still, in effect, this move gives Instacart’s employees the choice of either limiting their hours, or passing up the protections that come with employee status. “The vast majority of our Shoppers were already picking their own shifts at 20-30 hours a week,” an Instacart representative tells WIRED. “So this is right in line with what they were already working.”
Instacart’s decision also comes as the company is in the process of splitting its shopper and driver roles. Previously, Instacart shoppers had to deliver groceries to a customer’s house as well as shop for the items at the store. Under the new system, shopper-only workers “embed” in certain stores to prepare the orders for drivers; for now, it’s only these shoppers who are getting the option to switch over to part-time employee status. Instacart expects more than three-fourths of its in-store contractors to opt to become part-time employees, but it’s unclear what percentage of Instacart’s entire workforce that represents.
Either way, amid the growing push to for broader protections for on-demand workers, Instacart is likely hoping this move will cast it in a positive light—and possibly take some of the pressure off. The company didn’t directly address
the lawsuit it’s facing with this announcement, but it’s hard not to see the option to let workers choose their employment status as a possible pathway to compromise. Other on-demand companies may decide they can’t bear the costs that Instacart is apparently taking on by allowing workers to become employees. But some might decide that the boost to their public image is totally worth it.
