Instacart, a grocery delivery app, is changing the way it distributes customer tips to its delivery workers in light of reports that the company and others like it unfairly used the tip money to pay the workers’ wages.
The company’s decision to pull its current tip distribution policy follows reports that Instacart and DoorDash, a similar on-demand delivery app that hires contract workers to make deliveries, was using tips to fulfill workers’ wages instead of paying out the customers’ full tip separately.
Apoorva Mehta, Instacart’s founder, admitted Wednesday that the company’s newly enacted policy, which used tip money offered to the worker by customers to partially pay for workers’ base wages, was “misguided.”
In an open letter to Instacart’s contracted workers, known within the company as “shoppers,” Mehta said the company would be separating tip money from the workers’ base compensation. Mehta also announced that the company would be raising workers’ “guaranteed compensation” for each delivery.
“We heard loud and clear the frustration when your compensation didn’t match the effort you put forth,” the executive said. “As we looked at some of the extreme examples that have been surfaced by you over the last few days, it’s become clear to us that we can and should do better.”
Scrutiny on Instacart and DoorDash grew this week after NBC News and The New York Times reported on the companies’ misleading tipping policies.
Both companies told NBC and the Times that their workers were receiving the entire amount of tip money offered by the customers, but both companies also admitted to using a portion of the tips to pay for the workers’ wages.
“A tip is supposed to be a supplement to a worker’s pay, not a substitute,” Sage Wilson, who works with the worker’s rights advocacy group Working Washington, told NBC News on Monday.
Working Washington launched a petition against Instacart calling on the company to institute fair wages, full tips and more transparency for its workers.
On Wednesday, in response to Instacart’s decision to end its tipping policies, Sage said that workers will continue to call for transparency in their pay structure.
“Instacart finally admitted they’ve been taking tips,” Sage said in a statement posted to Working Washington’s social media pages.
“It’s not over,” Sage added. “Workers continue to call for a transparent pay structure so they can verify that what the company says they’re going to do is what they’re actually doing.”
Instacart implemented its controversial tip policies in November as part of a broader restructuring of its shopper payment program, Business Insider reported at the time. Under the new payment program, customers’ tips to shoppers were being used as part of the $10 minimum that shoppers were guaranteed per job. If no tip was issued, Instacart would still pay the shopper the full $10 minimum.
“They are subsidizing what they are paying me with the customer’s tip,” an Instacart shopper identified as Andrew P. told Business Insider in December.
Other Instacart shoppers told Business Insider that their wages were cut in half due to the company’s payment restructuring.
DoorDash reportedly had a similar payment program, which was implemented in 2017, according to The New York Times. Representatives of both DoorDash and Instacart admitted to the Times that their companies included a portion of tips in their guaranteed minimum payments to contractors.
DoorDash did not immediately respond to HuffPost’s request for comment on whether it would reassess its payment policies for tips.
Last week, Instacart was named in a class-action lawsuit filed by a group of contracted shoppers led by Instacart worker Sarah Lozano, according to NBC News. The lawsuit says that the company “intentionally and maliciously” used tip money to pay for the contracted workers’ wages while advertising to the app’s customers that “100 percent of customer tips went directly to shoppers.”
In his open letter, Mehta promised that Instacart would “retroactively compensate shoppers when tips were included in minimums” and said the company would “proactively” reach out to these shoppers.
Ashley Johnson, an Instacart shopper in Washington who spoke out against the company’s recent fluctuating wages, said she was “excited” about Instacart’s announcement but said more transparency was needed.
“I am excited to see the new changes implement (even though it hasn’t been clear on when that will be) and sincerely hope this was more than lip service,” Johnson tweeted Wednesday. “But it was bare minimum to avoid more lawsuits. Its still not full transparency.”