Instacart offers some contractors part-time employment

The grocery delivery startup is making the change as fellow on-demand service Uber faces regulatory scrutiny for not classifying its drivers as employees.

Ben Fox Rubin Former senior reporter
Ben Fox Rubin was a senior reporter for CNET News in Manhattan, reporting on Amazon, e-commerce and mobile payments. He previously worked as a reporter for The Wall Street Journal and got his start at newspapers in New York, Connecticut and Massachusetts.
Ben Fox Rubin
3 min read

Kaitlin Myers, a shopper for Instacart, working at Whole Foods Market in Denver in October. Cyrus McCrimmon/Denver Post

Instacart, the on-demand grocery-delivery startup, is making a more serious commitment to its workforce.

Starting Monday, the San Francisco-based company said it will switch its personal shoppers in some cities from contract workers to part-time employees. The change will begin with 200 workers in Boston and 100 in Chicago and will then roll out to other cities in the coming months. The company current uses more than 7,000 contract workers throughout the US. The new employees will gain benefits such as workers compensation and coverage for payroll taxes including Social Security, Medicare and unemployment, though health insurance won't be included.

Those working for Instacart as delivery drivers and those who do both the shopping and driving will remain contract workers. Any shoppers interested in staying as contractors can change jobs to either a driver or shopper/driver. Still, the number of people interested in forgoing employment status is expected to be small. Following a pilot program in Boston that started in February, Instacart said it expects more than three-fourths of its current in-store contractors to switch to part-time employment.

The announcement comes just as regulators are taking a closer look at employment structures of companies in the new on-demand economy, in which consumers can order everything from manicures to restaurant meals to car rides at the tap of a smartphone. Most of these services are powered by legions of contract workers who don't have the benefits of full employment, including health insurance and paid sick leave. If these services switch to employee models, it may provide more stability and money for workers though it could also weaken the profit of the companies and raise prices for customers.

Apoorva Mehta, Instacart's founder and CEO, told Bloomberg Business on Monday that the possibility of new regulatory issues wasn't the reason for making the change. Instead, the firm found its shoppers required more training and supervision than drivers, and so it made sense to hire them. There are no plans at this point to switch over the drivers, as well.

"The data from our pilot showed that this change improved the quality and efficiency of order picking," he said in a statement Monday, "and made for a better customer experience."

Instacart has already raised nearly $275 million to grow its business, which was founded in 2012 to pick out and deliver groceries from stores including Whole Foods, Petco and Costco.

Regulators and lawyers have looked into the employment models of some on-demand services, particularly Uber, the ride-hailing service that's now one of the most valuable venture-backed companies in the world. The California Labor Commission earlier this year ruled against Uber, saying one of its contract drivers should have been classified as an employee and ordered the company to pay her $4,152 in expenses. Uber, which is appealing the decision, could face substantially more costs, including Social Security, health insurance, paid sick days, gas, car maintenance and much more if all its drivers are eventually deemed employees. Labor lawyer Shannon Liss-Riordan also is suing Uber on behalf of drivers and their classification as contractors.

Plenty of other on-demand services have created similar models to try matching Uber's success, including ride-hailing rival Lyft, odd-jobs marketplace TaskRabbit, cleaning and handyman service Handy, and delivery-service Postmates.