Instacart to pay $5 million over allegations about worker benefits in S.F.

UPDATE: Instacart to lay off 7% of its workforce to ‘re-prioritize resources’

Instacart will pay over $5 million to people who worked for the grocery delivery service in San Francisco, as compensation for allegedly failing to provide some benefits, under terms of a settlement between the city and the company, The Chronicle has learned.

San Francisco alleged that Instacart had violated its ordinances covering health care and paid sick leave. Instacart did not admit any wrongdoing in agreeing to the settlement, which does not set a precedent.

“It’s time these workers get what they’re owed; there is nothing more important than ensuring that workers are paid fairly and their benefits are safeguarded,” said City Attorney David Chiu. His office worked with the Office of Labor Standards Enforcement on the case.

“The settlement represents years of work by our dedicated staff,” said Patrick Mulligan, director of the Office of Labor Standards Enforcement. “We will always stand up to make sure workers’ rights are protected.”

Instacart, which is based in San Francisco, said it was pleased to have reached an agreement with the city. “Instacart has always properly classified shoppers as independent contractors, giving them the ability to set their own schedule and earn on their own terms,” the company said in a statement. “We remain committed to continuing to serve customers across San Francisco while also protecting access to the flexible earnings opportunities Instacart shoppers consistently say they want.”

The settlement covers several thousand people who shopped for and/or delivered groceries as independent contractors from Feb. 1, 2017 through Dec. 15, 2020. Thereafter, Instacart workers were subject to Proposition 22, an initiative bankrolled by Instacart, DoorDash, Uber, Lyft and other gig companies that created a special status for their independent contractors, entitling them to some benefits while specifying that they were not employees.

“These workers did this work during the height of the pandemic, they absolutely earned these benefits,” Chiu said.

The city did not immediately know the exact number of workers affected by the settlement, but pegged it between 6,000 and 7,000.

San Francisco previously reached a similar settlement over benefits with restaurant delivery service DoorDash and another one with Instacart for an earlier time period.

Under terms of the settlement, Instacart will pay $5.25 million. Of that, $5.1 million will be go directly to workers based on how many hours they put in. The other $150,000 will cover up to $50,000 for an independent settlement administrator to disburse the funds, with the remainder going to the city for its legal expenses. San Francisco is taking only a fraction of what a for-profit law firm would charge.

San Francisco and other entities continue to pursue gig companies over their workers’ employment status.

In 2021, an Alameda County Superior Court judge ruled that Prop 22, the gig-worker exemption measure, was unconstitutional. Prop. 22 remains in force while the ride-hailing and delivery companies appeal that decision, which was in response to a lawsuit by the SEIU California union and some drivers.

A separate lawsuit by San Francisco, Los Angeles and San Diego against Uber and Lyft that claims drivers should have been classified as workers up until Prop. 22 passed is moving through the judicial system.

Chiu said he hopes both cases will end with defeat for the app-based services.

Regarding the Instacart settlement, he said, “Our hope is this sends a strong message that our city will aggressively investigate compliance with our labor laws and work hard to ensure workers are treated fairly.”

Carolyn Said is a San Francisco Chronicle staff writer. Email: csaid@sfchronicle.com Twitter: @csaid