Delivery startup Shipt is facing mounting legal challenges over its classified treatment of shoppers and couriers. A recently filed class action lawsuit on Oct 2022 alleges the company miscategorizes workers as independent contractors to avoid employee protections and cut costs.
California Lawsuit Aims to Reclassify Shipt Shoppers as Employees
Last October in 2022, a class action complaint was submitted in federal court accusing Shipt of unlawfully designating its grocery shoppers as independent contractors when they should be classified as employees. According to the lawsuit, brought by a Shipt shopper in California, the company’s contractor model violates state labor laws.
By classifying shoppers as independent contractors rather than employees, Shipt allegedly denies workers rights and benefits guaranteed under California law. This includes wage protections like minimum pay, overtime rates, expense reimbursement, meal breaks, and paid leave.
So far, the class action case covers Shipt shoppers in California from the past four years. But it could potentially grow to include thousands more across multiple states if the judge rules it meets class action standards.
State Lawsuits Allege Shipt Misclassification Cheats Workers
In addition to the private class action, Shipt currently faces lawsuits from the Attorneys General of Washington D.C. and Minnesota alleging contractor misclassification.
According to a 2021 D.C. complaint, Shipt violates district laws by wrongly categorizing its full-time shoppers as independent contractors. This improper classification enables Shipt to avoid legal obligations like minimum wage, overtime pay, and paid sick leave, the lawsuit claims.
Meanwhile, Minnesota’s 2021 lawsuit similarly alleges Shipt denies basic statutory rights to workers by mislabeling them as contractors instead of employees. Through this misclassification scheme, the suit argues Shipt engages in wage theft and unlawfully increases profits.
Gig Companies Scrutinized Over Contractor Policies
Over the past few years, major gig economy companies like Uber, Lyft, and DoorDash have faced multiple lawsuits seeking to reclassify their contractors as employees entitled to better pay and benefits.
Responding to these cases, government agencies like the Department of Labor and the Federal Trade Commission have issued guidance cautioning against misuse of independent contractor status. Some states, like California, have also enacted stricter tests to determine who qualifies as a contractor rather than employee.
Legal experts say improperly labeling employees as independent contractors allows companies to skirt minimum wage requirements, avoid payroll taxes, and deny benefit obligations. This gives businesses more power over workers while reducing labor costs.
Shipt Defends Shopper Classification Practices
In statements to the media, Shipt has stood by its shopper classification model. The company argues that retaining contractor status provides the flexible scheduling that attracts most people to the platform. A Shipt spokesperson claimed the independence and income potential of contractor work is valued by shoppers.
However, the lawsuits call into question these claims about shopper preferences. Court filings allege Shipt heavily promotes flexible hours in recruiting but actual shopper schedules are tightly controlled. The cases also argue Shipt punishes critics by removing their ability to receive orders.
While Shipt touts the benefits of contractor roles, legal experts say workers bringing misclassification cases desire the protections and security of formal employment. The pending class action lawsuit could force Shipt to reconsider and revamp its labor practices.
Shoppers Seek Fair Pay As Costs Rise
Amidst surging inflation over the past year, many Shipt shoppers argue the company’s opaque compensation system enables wage theft and income instability. Shipt maintains recent adjustments have “improved pay for most orders.”
But workers claim companies like Shipt rely on misclassification and manipulation to lower costs while exerting control over them. While Shipt attributes its contractor policies to worker choice, the lawsuits allege many desire recognized employee status and rights.
The outcome of the legal challenges against Shipt could help determine the future worker protections and classifications across the rapidly expanding gig economy. For now, Shipt shoppers continue working to gain the pay, benefits, and rights they say employee status would properly grant them.
