One of the biggest names in the emerging “on-demand economy” is changing the way some of its workers are paid, a shift that comes amid mounting criticism that a new generation of technology companies is exploiting labor laws.
The grocery delivery company Instacart, which has relied on contractors to fill and deliver online orders, will now make some of its shoppers part-time employees. The change will be introduced in Boston and Chicago on Monday, and Instacart might expand the practice to its 14 other US markets, the company said.
Instacart is among several technology companies that have been sued over their use of contract labor to provide services, a move that critics contend saves the companies money at the expense of workers.
On-demand services range from house cleaning to dog walking to package delivery, but the highest-profile example is Uber Technologies Inc., which lets consumers book rides-for-hire from people driving their personal cars. This month, the California Labor Commission ruled an Uber driver should be classified as an employee, not an independent contractor.
Uber contends it is a logistics company that merely matches customers with independent contractors. But it is facing lawsuits, including those filed by a Boston attorney, Shannon Liss-Riordan, alleging the drivers are essentially company employees because Uber controls their working conditions. A similar suit filed in California earlier this year alleges that Instacart denies workers the benefits of traditional employment.
Instacart said its decision to make some of its contractors in Boston and Chicago part-time employees was unrelated to the lawsuits. Instead, it put some of its Boston contractors on the payroll for several months as a test and found they did their jobs better, the company said. The quality of the groceries those part-time employees selected was higher, Instacart said, and they filled orders more quickly.
“There are a lot of nuances to picking groceries. When you’re thinking about how to pick the right avocado, or for example prawns, there are just lots of things that you have to look for,” chief executive Apoorva Mehta said. “As part-time employees, we can make sure that they are provided the right sort of supervision as well as the right type of training.”
Juliet Schor, a Boston College professor who has studied independent contracting in the tech sector, said lawsuits against companies such as Instacart and recent political campaigns to increase the minimum wage in states around the country indicate a broad dissatisfaction with the modern labor market.
“There is a sense in which the momentum is moving against these platforms, when it comes to the lack of support for the people working on them,” Schor said. “People are feeling like the levels of unfairness and dysfunction in our economy are growing more intolerable.”
Instacart allows people to order groceries, either through its website or smartphone app, to be delivered as quickly as in one hour. Stores it serves in the Boston area include Shaw’s, Market Basket, and Whole Foods.
In the Boston area, Instacart competes with Peapod, an online ordering service of Stop & Shop stores that offers delivery drivers formal employment and good benefits, said Jim Carvalho, a political director for the United Food and Commercial Workers International Union.
Instacart had recently split its workforce into two groups: in-store shoppers, who fill customer orders, and the drivers who deliver them.
Under its new policy, in-store workers in Boston and Chicago will become part-time employees, but drivers will remain independent contractors.
Workers who want to be contractors, Mehta said, prefer the flexibility of choosing their shifts instead of working a fixed schedule. It also didn’t make sense to hire the shoppers as full-time workers because most of them are looking for part-time work, he said.
The company does not disclose how it pays contractors. But online reviews from those workers and the lawsuit against Instacart suggest a complicated pay structure that varies by market, with contractors being paid commissions based on the size of the orders they fill, in some cases with a minimum hourly guarantee.
Mehta declined to say how many of the hundreds of contractors Instacart has in the Boston area will become part-time employees. He also declined to disclose the cost to Instacart, or what the part-time shoppers would be paid, other than that it would be above the minimum wage of $9 per hour.
But the increased short-term expense is worth it, Mehta said, because part-time workers are more productive.
“We want to do what’s right for our customers, for our shoppers, and for the community in general,” he said.
Jonathan Davis, a San Francisco lawyer who filed suit against Instacart, said the change amounted to “conceding an essential point in the case.”
“To the extent that Instacart shoppers are being recharacterized as employees, that’s a welcome development,” he said.
“It’s been our claim from the beginning that all the Instacart workers are employees of the company and should be treated that way.”