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Marketplace Morning Report

Reversing a trend, Instacart checks out part-timers

Nova Safo Jun 22, 2015
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In a move that’s the opposite of many others in the on-demand, sharing economy, the online grocery delivery service Instacart is converting some of its independent contractor shoppers, who purchase groceries on behalf of customers, to part-time employees.

The company says it is making the change in Chicago, expanding a pilot program that began in Boston. Andrea Saul, Instacart’s vice president of communications, says the program will continue to expand in the coming months. Instacart does business in 16 other cities.

The move will add to Instacart’s costs. “We are going to incur workers’ compensation, different payroll taxes like unemployment, social security and Medicare,” Saul says.

But Instacart was willing to take on those costs, because converting independent contractor shoppers into employees improved the company’s customer service. 

“Our shoppers got more accurate picking items,” Saul says. “We had more on-time deliveries.”  

The company attributes the change to improvements in training and supervision made possible because workers were employees. 

Instacart has some 7,000 contractors, only a few hundred of whom are affected by the change so far. But of those given the option to switch to employee status, Saul says 75 percent did. 

“Wages will vary by market for the part-time employees, but we will be competitive in each market to attract and retain shoppers,” Saul says. “The hourly floor is above local minimum wage in all regions.” She did not detail specific numbers.

The conversion from independent contractor to part-time employee is an important distinction. Other companies have fought such a change. Last week, a California regulatory agency ruled that an Uber driver was an employee. Uber is appealing that decision.

“What we’re caught with are 20th century definitions for a 21st century workforce and economy,” says Virginia Democratic Sen. Mark Warner, who has been vocal on the issue and says it is time for a new way of defining work.

“The idea that everybody fits neatly into being an employee, unemployed or an independent contractor really doesn’t reflect the changing nature of this economy,” Warner says.

One proposal is to create a dependent contractor designation, which would provide some employee-level benefits to independent workers. There are a host of other ideas, too.

Jeffrey Hirsch, an expert on labor law and a law professor at the University of North Carolina, says the issue is heating up as the on-demand economy explodes. “The indecision and the confusion involved is what’s most harmful, both for the companies and for the workers,” Hirsch says.

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