Instacart converts some contractors to part-time employees

Instacart is converting a large part of its workforce to part-time employees, becoming one of the first on-demand startups to extend benefits such as unemployment and Medicare to the independent contractors who sustain its business.

A large portion of Instacart staff in Chicago and Boston have become part-time employees, working 20 to 30 hours per week. The change applies primarily to the contractors who shopped for groceries that were ordered through the company’s app. San Francisco-based Instacart makes a Web and smartphone app for consumers to order groceries from stores such as Whole Foods and Costco, which are delivered to their front door in about an hour.

The switch will be rolled out to more cities across the country; a date for changes to Bay Area workers was not provided.

Workers that want to keep their independent contract classification can take a delivery job, which will not be converted to an employee position, spokeswoman Andrea Saul said in an interview Monday. Workers who do the in-store shopping — picking out the ice cream or toilet paper a customer has ordered — will receive training and have management oversight as part of the switch to employee status. Instacart in the past used a single contractor to do both the shopping and delivering, but last year began splitting the tasks between two people.

Instacart had been piloting the part-time employee classification in Boston since February, and found that well-trained shoppers with a consistent schedule, and who could ensure that avocados are ripe, bananas aren’t squished and eggs aren’t cracked before being delivered to a customer, dramatically improved customer satisfaction, Saul said. And shoppers who knew a store’s layout were also quicker at picking items, reducing the time between order and delivery.

The shift comes amid an increasing debate over how technology companies such as Uber, Lyft, TaskRabbit and Postmates — which make apps to connect a customer with a certain service — designate their workers. By relying almost exclusively on independent contractors, companies have been able to keep their costs down and revenue high, and grow more quickly. However, an increasing number of these workers rely on driving for Uber or shopping for Instacart as their full-time employment, yet get none of the benefits full-time employees enjoy. Bloomberg first reported on Instacart’s employment shift. 

The California Labor Commissioner last week ruled that one former Uber driver was an employee, not a contractor, and the company must pay her $4,152 in driving expenses such as tolls and mileage. Uber has appealed the decision, and is also fighting a ruling in Florida that classified a former driver as an employee who could collect unemployment.

Saul said Instacart part-time employees will not get health care but will have access to unemployment benefits, Social Security and Medicare. She said the company would face steep costs adding these benefits, but that the improvements in customer satisfaction they have seen from the switch outweigh the cost increases.

Instacart has 7,000 contract employees across the country.

Photo: Instacart founder and CEO Apoorva Mehta in the company’s new offices South of Market in San Francisco, Calif., on Friday, Nov. 15, 2013. By Laura A. Oda/Bay Area News Group.

 

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