Instacart, the delivery on demand service, is facing a class-action lawsuit over how it handles tips earned by drivers.
According to a report in NBC News, last week a class-action lawsuit was filed on behalf of Sarah Lozano, a Los Angeles Instacart worker, and other Instacart shoppers, alleging that Instacart “intentionally and maliciously misappropriates gratuities in order to pay plaintiff’s wages, even though Instacart maintained that 100 percent of customer tips went directly to shoppers.”
According to the lawsuit, Instacart allegedly knows that customers think the tips are given to shoppers in addition to what they earn at the company, and do not regard them as a means to supplement those earnings. Instacart is facing complaints that the tips these gig economy workers receive are used to cover a portion of their wages instead of increasing their earnings.
The company contends it is transparent with the pay structures, but consumer protection groups cried foul in the NBC report. Carmen Balber, executive director of Consumer Watchdog, said in the report that most consumers in the U.S. think the tip is on top of anything the driver or delivery person makes in working for the service.
Around the end of last year, Instacart changed the way it pays workers in what it said was an effort to be more transparent. Before the changes, drivers got a base rate and a fixed fee for each item ordered, with the tip was added on top of that. Under the new structure, Instacart comes up with a so-called batch payment based on the items the shopper is picking from the shelves and delivering. Shoppers receive more if the item is heavier. They also get paid for the mileage driven, and receive small bonuses at peak times. Workers are guaranteed at least $10 a job, with Instacart using a portion of the tip to supplement jobs that pay under that amount. After that, shoppers get their tip.
Since the change, Instacart drivers have been posting their pay online and complaining about a big hit to earnings as a result of the new structure. In one case highlighted in the report, a shopper received $.80 for a job because of a $10 tip, bringing the cost of the trip to $10.80. Instacart said that was an extreme case, and that it plans to institute a $3 minimum batch fee on all orders. The company declined to comment on the lawsuit to NBC News.