Instacart says local shift from contractors to employees not spurred by lawsuit

BOULDER — Grocery-delivery service Instacart announced Monday that it is offering its contractor in-store shoppers in the Boulder market the chance to apply for employee roles, though the company isn’t saying how many such hires will be made.

The move is part of a shift that San Francisco-based Instacart has been rolling out gradually across the country since February. Rather than a contractor shopping for a customer’s groceries and then delivering them, the shopping and delivery roles are being split among different people. For the most part, shopping will now be done by part-time employees of Instacart stationed in individual stores who will hand off the orders to contractor delivery drivers.

The shift comes as Instacart faces a class-action lawsuit in California that alleges the three-year-old company has been misclassifying workers as independent contractors and, as a result, has wrongly avoided paying contractors for expenses and offering them benefits like workers’ compensation insurance or overtime pay. That lawsuit was filed in January.

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Instacart vice president of communications Andrea Saul said the lawsuit did not influence the company’s decision to hire on shoppers as employees, and said it was more about improving customer service.

“This is something that was completely about our business,” Saul said.

Saul said Instacart has found that by offering training and oversight — of aspects of the job such as picking out fresh produce — to shoppers the company has cut down on order errors and has also led to more on-time deliveries. The drivers, meanwhile, will remain contractors because the company doesn’t feel like the same training and oversight is needed for their tasks.

“In order to provide the best quality experience for Instacart customers, we wanted the ability to train and supervise our in-store shoppers, and that requires us to make them employees,” company founder and chief executive Apoorva Mehta said in a prepared statement. “We’re already seeing the benefits in terms of higher customer satisfaction and higher shopper retention rates, so we think in the long term, it will be well worth the extra costs we are incurring.”

The company hasn’t disclosed the specific pay rates for its hourly employees, but notes that it will be higher than minimum wage in all markets, with opportunities to make more through tips and commissions. How the pay rates will ultimately differ from the shoppers’ pay as contract workers is unclear. Saul said the formula for paying contractors was complex and not easy to compare.

“It’s just going to be different,” Saul said. “There’s just really no way to break that down.”

In addition to Boulder, Instacart announced the same changes for its Denver and Philadelphia markets on Monday, with the employment option now offered in 15 of 16 markets nationwide in which the company operates.

Instacart launched its service in Boulder in September 2014. The company’s Boulder service area includes the communities of Louisville, Lafayette and Superior, while the Denver service area stretches north roughly to Interstate 76.

Saul said there are no immediate plans for expansion of the Colorado territories.