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Letter to Instacart Re: Policies on Independent Contractors

Dear Mr. Mehta,

We are writing to you from Human Rights Watch, which is a global non-governmental organization that monitors violations of human rights by state and non-state actors in more than 90 countries around the world.

We have been conducting research for publication on the impact of Instacart’s policies and practices on the rights of Instacart shoppers and delivery workers who are classified as independent contractors (in the following referred to as “workers”) in California and other parts of the country. The research is based on more than 20 interviews with shoppers and delivery workers and labor rights experts. In the interest of thorough and objective reporting, we are seeking your comment.

The research we are planning to publish finds that the misclassification of Instacart workers as independent contractors in California is undermining their rights to a decent living and safe and healthy working conditions.

Under state and federal employment law, independent contractors are not entitled to basic labor protections like the applicable minimum wage standard, guaranteed sick pay, overtime pay, unemployment assistance, or the ability to join a union. They also pay the combined employee and employer amount towards Social Security and Medicare taxes.

The lack of minimum wage protections has enabled Instacart to introduce black box algorithms in November 2018 to calculate workers’ base pay. Even though these algorithms determine a critical component of workers’ wages, your company has provided few details about how they work.

Instacart has said that these algorithms account for factors such as the number and type of items ordered, store location, and distance traveled. But it has not disclosed the full list of factors that these algorithms take into account, or how each factor is weighted in the final calculation. Workers who spoke with Columbia University researchers for a 2019 study, however, believed that the algorithm could be learning the lowest pay acceptance rate in particular regions at particular times. If that’s the case, the algorithm could facilitate individual-level pay discrimination.

Workers based in California told us that your company’s pay algorithms have reduced their total earnings by as much as 20 percent, causing them to earn below the state minimum wage. Workers also told us that these algorithms are causing unpredictable reductions and fluctuations in their earnings. As a result, some of them have struggled to make enough money to buy groceries or keep up with their rent. 

Due to the lack of transparency about workers’ earnings, we rely on quantitative studies by other research institutes on the average hourly pay of Instacart workers to corroborate these concerns.

A study by the labor rights group Working Washington found, based on 1,400 weekly earnings reports from Instacart workers, that the average hourly pay was $7.66 an hour before factoring in tips, and after accounting for business-related expenses and additional payroll taxes borne by independent contractors. Under the California Labor Code, employers may not use tips to make up the minimum wage. Accordingly, this figure is well below the state minimum wage in California, which is $13 per hour, and almost half the minimum wage in high cost cities such as Los Angeles ($15 per hour) and San Francisco (about $16 per hour).

The 2019 Columbia University study, which analyzed earnings information submitted by 534 Instacart shoppers across the country, estimated that they earned an average of $13 per hour including tips, and after accounting for expenses. However, after subtracting tips and additional payroll taxes, the average hourly earnings fell to $8.77 – much closer to the figure provided by Working Washington.

Problems with accessing tips also exacerbate workers’ struggles with low wages. As independent contractors, Instacart workers are not entitled to protection against interference with tips provided to employees under the California Labor Code. In 2018, Instacart used tips to help make up the difference between what workers received for a batch of orders and the $10 minimum it guaranteed workers for all batches. In 2019, after significant civil society and media scrutiny, Instacart admitted that this practice was “misguided,” and promised to return the tips it used to make up the difference.

In March 2020, workers reported that customers were luring workers to pick up their orders with big tips and removing them after workers had completed their orders. In June 2020, Instacart announced changes to mitigate these abuses, such as requiring customers to leave feedback if they decide to remove the tip after delivery, and de-activating them if they “consistently and egregiously” engage in this behavior. 

While Instacart introduced corrective measures in both cases after significant public controversy, these situations illustrate the extent to which workers are vulnerable to tip-related abuses in the absence of meaningful legal protections protecting employees’ tips. The lack of wage transparency also instills fear among workers that Instacart could covertly introduce other practices to wrongfully reduce or withhold their tips in the future.

Workers’ classification as independent contractors also means that they are not guaranteed paid sick leave. Although Instacart rolled out a paid sick leave policy in March 2020, we found that it was difficult for workers to provide a positive Covid-19 test result or a mandatory quarantine order by a public health agency – the evidence required to qualify for sick pay or the extended pay for shoppers affected by Covid-19. At least one worker we interviewed continued to work for the platform despite having Covid-19 symptoms because she was unable to qualify for the policy. In response to criticism of this policy, Instacart began in June 2020 providing free telemedicine consultations to workers, making it easier for them to obtain a Covid-19 diagnosis. Nevertheless, this problem would have been avoided if workers were guaranteed paid sick leave from the outset.

We understand that you support Proposition 22, a ballot initiative in California that would exempt Instacart from complying with AB5, a law passed late last year that would reclassify many gig workers as employees and guarantee them minimum wage and other labor protections under the California Labor Code.

Prop 22 instead proposes a wage formula that pays workers at least 120 percent of the applicable minimum wage while they are fulfilling orders, plus thirty cents for each mile traveled to complete delivery. But we have found that this formula fails to account for the hours they spend waiting on the Instacart app for shopping requests. The mileage reimbursement is also only about half the 2020 rate set by the IRS; all other expenses remain the responsibility of workers. Prop 22 also does not provide workers with other labor protections afforded to employees, such as workers’ compensation and guaranteed paid sick leave.

In addition to providing us with comment on the above, we have attached a list of questions that we hope you will answer.

We would appreciate your response to the attached questions, or comments on the issues described in this letter, by September 22, 2020. We would also be happy to discuss these issues with you or your staff. If you have any questions or would like to schedule a remote meeting, please contact Namratha Somayajula at somayan@hrw.org.

We thank you in advance for your attention to this matter.

Sincerely,

 

Amos Toh

Senior Researcher and Advocate

Artificial Intelligence and Human Rights

 

Lena Simet

Senior Researcher and Advocate

Poverty and Inequality

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