According to the proposed settlement agreement between the City Attorney's Office and Instacart, the delivery company will pay $46.5 million to settle a lawsuit filed by the city in 2019. According to the lawsuit, the company misclassified workers as independent contractors, depriving them of protections and compensation that employees would have received, such as overtime pay, paid breaks, and reimbursement for expenses such as gas mileage and cellphone data.
The judgment will apply to those who worked as Instacart "shoppers" between September 2015 and December 2020, with restitution funds distributed based on the number of hours worked by each person during that time period.
According to the City Attorney's Office, it will work with a fund administrator to develop a public website where eligible workers can confirm their payment information for restitution payments. The settlement also includes more than $6 million in civil penalties, which the City Attorney's Office says will go into a trust fund for consumer protection law enforcement.
"We are pleased to get justice for these delivery workers, who, at the height of COVID-19, provided an invaluable service to California households," said San Diego City Attorney Mara Elliot.
Instacart stated in a statement that its California employees were always properly classified as independent contractors and that the settlement contains no admission of wrongdoing.
"We are thrilled to have reached an agreement with the city of San Diego." "Instacart has always correctly classified shoppers as independent contractors, allowing them to set their own schedules and earn on their own terms," the company said in a statement. "We remain committed to continuing to serve our customers across California while also protecting Instacart shoppers' access to flexible earning opportunities."
The lawsuit was the first of its kind against a "gig-economy company," according to the City Attorney's Office, and was filed in response to a California Supreme Court decision that established a three-prong standard — the "ABC test" — for determining whether a worker was an employee or independent contractor.
Assembly Bill 5, introduced and later signed into law by former Assemblywoman Lorena Gonzalez, broadened the scope of the "ABC test" and established standards that classified many app-based drivers as employees.
App-based companies such as Instacart, Postmates, Uber, and Lyft lobbied for exemption from the AB5 requirements through the ballot initiative Proposition 22, which passed in late 2020. An Alameda County judge later ruled that Proposition 22 was unconstitutional, but the decision was overturned on appeal, so the initiative remains in effect for the time being.