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Shipt Sued Over Worker Classification

DC's attorney general accuses the company of misclassifying workers as independent contractors, and denying them benefits they're owed.

A Shipt shopper delivering a customer their order
Classifying workers as independent contractors also means Shipt doesn't provide payroll taxes, the DC attorney general says.

The District of Columbia is suing same-day delivery company Shipt for allegedly denying its full-time workers wages and benefits. The lawsuit, filed Oct. 24, alleges that Shipt misclassifies its workers as independent contractors instead of employees, thereby avoiding obligations on minimum wage, overtime and paid sick leave. 

Classifying workers as independent contractors also means Shipt doesn't provide payroll taxes, which would go toward paid family leave and workers' compensation, DC Attorney General Karl A. Racine said Thursday.

"Increasingly, we're seeing companies abuse hard-working District residents by fraudulently calling them independent contractors and, as a result, denying them wages and benefits they are legally owed," Racine said in a statement.

Shipt provides same-day delivery services from a range of nationwide stores, including Target, Costco, CVS, Sephora and Walgreens. The company was acquired by Target for $550 million in 2017. Shipt's delivery drivers are called Shoppers.

"The flexibility that comes with being an independent contractor is the primary reason Shipt Shoppers choose to earn on our platform," Shipt spokesperson Evangeline George told CNET in an emailed statement. "We strongly disagree with the action taken by the Attorney General for the District, and we'll continue advocating for Shoppers and the opportunity to earn flexible income across the DC area."

Minnesota Attorney General Keith Ellison announced a similar lawsuit against Shipt earlier this week, alleging that Shipt is misclassifying its workers as contractors and "taking advantage of Minnesotans to enrich itself while leaving workers to fend for themselves."

"These workers have no clarity on how much they will be paid day-to-day, and they often don't receive the minimum wage and overtime they're entitled to," Ellison said in a statement Monday.

The argument over whether gig workers are classified as employees or contractors has plagued the industry for years, leading to lawsuits, laws and election propositions

Earlier this month, the Biden administration released a proposal that could make it easier for courts to reclassify gig workers at companies like Uber, Lyft and DoorDash as employees.

"While independent contractors have an important role in our economy, we have seen in many cases that employers misclassify their employees as independent contractors, particularly among our nation's most vulnerable workers," Secretary of Labor Marty Walsh said on Oct. 11.

The Federal Trade Commission in September also clarified its policies for the gig economy in an effort to protect gig workers from "unfair, deceptive and anticompetitive practices."