San Francisco Receives $5.25 Million Settlement From Instacart Over Gig Worker Labor Law Compliance

City Attorney David Chiu and San Francisco Office of Labor Standards Enforcement (OLSE) director Patrick Mulligan announced on Thursday that the city of San Francisco will be receiving a $5.25 million settlement from grocery delivery company Instacart over not complying with city health care and paid sick leave ordinances.

According to city officials, Instacart violated the Health Care Security Ordinance between 2017 and 2020. The ordinance states that all employers with 20 or more workers are required to spend a minimum amount on health care benefits for each employee. In addition, all employers in the city need to offer paid sick leave. In 2020, the OLSE began an investigation into Instacart’s overall compliance with these laws, finding that they had not been.

While Instacart later corrected their practices, the investigation hovered over the company for several years. Working with the City Attorney’s Office and the OLSE, they finally reached a $5.25 million settlement on Thursday. According to the terms of the agreement, $5.1 million will go directly to workers who had been affected by the violation between 2017 and 2020, with the rest going towards OLSE enforcement costs.

In a joint statement on Thursday, both Chiu and Mulligan praised the outcome, noting that the city’s labor laws held firm in the division.

“This is the city’s second major settlement directly benefiting delivery app workers in San Francisco,” said City Attorney Chiu. “We hope this sends a strong message that the city aggressively investigates compliance with our labor laws and works hard to ensure workers are treated fairly.”

OLSE Director Mulligan added that “This settlement represents years of hard work by our dedicated OLSE staff. These Instacart workers made deliveries and performed this work even during the height of the pandemic, and now they will receive the benefits they are owed.”

In response to the settlement on Thursday, Instacart also released a statement, noting that “Instacart has always properly classified shoppers as independent contractors, giving them the ability to set their own schedule and earn on their own terms. We remain committed to continuing to serve customers across San Francisco while also protecting access to the flexible earnings opportunities Instacart shoppers consistently say they want.”

Employment attorneys noted to the Globe on Friday that the investigation and settlement had been based more on the city’s confusing wording of the law and vagueness of the law’s wording, as other company’s in recent years had been found in violation in nearly the exact same circumstances.

“The law has been confusing for many companies, as many have broken down into smaller companies with less than 20 employees, or had them listed more as gig workers rather than full-time employees and were confused about whether they applied,” explained labor lawyer Allison Drake on Friday. “People have said they were trying to get around giving the workers benefits, but the nature of gig work had left many employers confused about the laws for years, with San Francisco’s not really helping matters. The city and companies are starting to get it now, but as today’s settlement showed, confusion over it is still rampant, especially for companies with a lot of gig workers.”

In addition to Instacart, DoorDash recently had a similar settlement in 2021, paying the city $5.325 million over violations on the same law.