San Diego Wins Suit Against Instacart Over Worker Protections

Speaker 1: 00:00 Instacart, the shopping app that provides personal shoppers for grocery pickup and home delivery has run into trouble with California's new AB five labor law. The company announced Tuesday that it will appeal a ruling by a San Diego judge that people who work for the company should be reclassified from independent contractors to employees. The city of San Diego sued the company claiming it was in violation of the new law and that it owed employees back wages and owed state and federal payroll taxes. This is one of the first legal battles over a B five which has rocked the gig economy and parts of the freelance employment world. Jordan, me is San Diego union Tribune business reporter Brittany miling and Brittany, welcome. Thanks for having me. San Diego. Judge Timothy Taylor's ruling is from a case brought by San Diego city attorney Mara Elliot last September. What was the city asking for? They were alleging that the workers should be classified as employees instead of contractors and as such, they should be retroactively given lost compensation. Speaker 1: 01:05 Um, you know, think for things like meal breaks that they had not been given insurance. They also alleged that Instacart, um, had evaded payroll taxes to the state and federal government. How do the terms of working for Instacart line up with the rules of employment according to AB five? So Instacart operates kind of similarly to Uber. Like I think of the shoppers as like the, the Uber of the grocery delivery company. And so these are gig economy workers. They're not, they have for a long time, not been considered, um, employees. Um, and so they, they actually though they don't pass this new kind of new three factor test, uh, as the, the definition of a contractor. And so that's what this case was kind of sitting on is the judge saying, um, if this case were to go to trial, Instacart's not going to be able to prove that these shoppers are actually contractors. Speaker 1: 01:56 And so, you know, we're going to go ahead and put this injunction in place. Now, what does Instacart say about how designating it's workers as employees instead of independent contractors? How did they say it would affect the company? Um, they're, they're saying that this is very serious for the livelihood of the company. Very expensive because not only do they have to make tens of thousands of you shoppers here in California, part time employees, but they have to set up a lot of infrastructure around that. That's not just management, but we're also talking about a lot of new software because right now the app is meant for the gig economy workers. There's going to be a lot of new features needed for Instacart to make these shoppers now part time employees. So they're actually saying like this could, this could sink us, you know, if we have to reclassify all these workers, even though the judge ruled in the city's favor, his ruling seemed to express some skepticism about AB five. Speaker 1: 02:48 Isn't that right? That's right. He kind of makes the point that um, this is how the law reads. And so yes, these workers are not, um, you know, they're not contractors. However, he, he kind of addresses that there are a lot of people who are not sure about the wisdom of this law as it's written. And if the, if the city gets what it wants, then the workers may not actually get what they want, which is this company might go out of business. They're not going to get their lost wages because they're going to be drowning from creditors and bankruptcy and who knows what. And the state is also not going to get their payroll taxes. So he's kind of makes the point that this is a bit of a lose, lose situation. And, uh, Instacart says it will appeal the ruling, but didn't the judge almost invite them to do that? Speaker 1: 03:37 He did. Yeah. And he kind of said he kind of wanted to urge the court of appeals to, to figure this out because there's a lot of cases cropping up and so he is kind of saying, you know, it'd be really great if this could get sped along so that companies really have a better idea of what is being asked of them moving forward. Now judge Taylor issued an injunction against Instacart, but it's not the kind of injunction that brings Instacart's operations to a halt. Right. It's actually, it was a bit confusing for me. Um, the injunction doesn't actually force any action really. It's kind of like a, it's like a warning saying, okay, if this proceeds to trial, you're probably going to lose. You might, as you know, you should be stopping classifying your workers as contractors now. Um, but it's not the kind of mandatory injunction which would actually force some payments happening from Instacart. Speaker 1: 04:28 The judge said, you know, I don't want to be responsible for overseeing all of that. And so, you know, he basically said, we don't have the resources to do that and I also kind of don't want to do that. And so this was kind of just like a, like a warning. What does a three factor test for independent contractors or employees? So they're calling it the ABC test. And then it's kind of interesting is you don't wanna just have to satisfy one of these three factors. You have to satisfy all of them to be considered a contractor. Um, and so you have to be doing work that is outside the core of the business, which, you know, for Uber and Instacart, you can't really make that argument. There are absolutely core to the business and then they have to have an independent trade or business. Speaker 1: 05:10 So I think of that as like, you know, a plumber who comes in and fix the sink at Instacart, that's a contractor. He's got an independent business but the shopper's not so much and they have to be free from the control of the company. And so the judge is making the point that it's very likely that Instacart is not going to meet, um, one or two, possibly even three of those factors. This ruling comes as assemblywoman Lorena Gonzalez is tweaking a, B five after getting an really an avalanche of pushback from freelance workers throughout the state. Will this ruling have any effect on that process? Uh, so far, you know, like the judge says in his injunction, all three, um, you know, sections of government have spoken on this issue. We had Dynamex with the Supreme court. Then we had the legislature, you know, put forth AB five and then the governor signed it. And so at this point he's kind of saying there's not a lot of wiggle room here. Okay. I've been speaking with San Diego union Tribune reporter Brittany miling, and thank you. Thank you.