SAN DIEGO (CN) – The San Diego city attorney announced Tuesday that a judge has found grocery delivery company Instacart likely violates state employment laws by misclassifying its grocery shoppers as independent contractors, eschewing paying its employees benefits.
San Diego City Attorney Mara Elliott, on behalf of the People of California, sued Instacart last year, claiming the company misclassifies its workers as independent contractors to avoid paying employees benefits and reimbursing them for costs associated with the job, including vehicle insurance and registration, gas and cellphone to use the mobile app to fill grocery orders and deliveries.
San Diego Superior Court Judge Timothy Taylor found Instacart could not satisfy one prong of the three-part “ABC test” codified by a 2018 California Supreme Court decision for determining if a worker is an employee rather than an independent contractor.
“At this point is it more likely than not that the People will establish at trial that the ‘shoppers’ perform a core function of defendant’s business; that they are not free from defendant’s control; and that they are not engaged in an independently established trade, occupation or business,” Taylor wrote in his 6-page preliminary injunction order.
In a statement, Elliott called the decision “a landmark ruling” and asked Instacart to work with her office to come up with a solution.
“This decision is also a warning to other companies to do right by their employees. As the court said, ‘The handwriting is on the wall.’ California has had two years since the Supreme Court’s Dynamex decision to distinguish between a contractor and an employee. Everyone, not just Instacart, must live up to their legal responsibilities; they cannot ignore the significance of what occurred here,” Elliott said.
Instacart said in a statement it plans to appeal Taylor’s order.
“We disagree with the judge’s decision to grant a preliminary injunction against Instacart in San Diego. We’re in compliance with the law and will continue to defend ourselves in this litigation. We are appealing this decision in an effort to protect shoppers, customers, and retail partners. The court has temporarily stayed the enforcement of the injunction and we will be taking steps to keep that stay in place during the appeals process so that Instacart’s service will not be disrupted in San Diego,” the company said in a statement.
Taylor also rejected Instacart’s argument that it would be irreparably harmed by a preliminary injunction because it would be required to upend its business model by hiring thousands of California workers and developing protocols and infrastructure, plus hiring managers, to oversee its employees.
Instacart has already taken steps to “bring itself into compliance with Dynamex,” Taylor wrote, and only “minor additional steps” will be required to be in full compliance.
“It bears repeating that the unanimous Supreme Court decision is now nearly two years old. While change is hard, defendant cannot legitimately claim surprise or that it has not had time to adjust its business model,” Taylor added.
Taylor pointed out all three branches of California’s government have now “spoken” on the issue, with the California Legislature passing Assembly Bill 5 last fall codifying Dynamex. The law was signed by Gov. Gavin Newsom and went into effect on Jan. 1.
“The policy of California is unapologetically pro-employee (in the several senses of that word) … To put it in the vernacular, the handwriting is on the wall,” Taylor wrote.