App-based grocery delivery service Instacart announced today that it is rolling back an underhanded policy in which customers’ tips were used to subsidize the wages of delivery workers, Buzzfeed News reports.
Over the past several days, the controversial practices used by on-demand food delivery service Doordash and Instacart had drawn the condemnation of both by customers and the app’s own delivery workers, who shared screenshots of their earnings and details of the misleading pay policies in online forums.
Through the policy, workers were guaranteed a base amount of $10 per delivery; Instacart would apply tips to the overall payment, according to Business Insider. For example, if a customer tipped $4, Instacart would only pay an additional $6 to the driver. If the tip was $6, the company would pay even less — just around $4 for that delivery. Some observers characterized this as a deceptive business practice equivalent to tip theft, but because of the relatively unregulated nature of the gig economy, delivery workers had little legal recourse.
The troubles with Instacart began in October when the company unveiled a new pay structure for “shoppers” (the term Instacart uses for its delivery workers), but in November workers began to notice a significant drop in earnings — up to 40 percent in some cases. The same was true for Doordash, which implemented a similar payscale to Instacart’s back in 2017 that applied tips to base pay for orders.
As Doordash’s delivery worker porthole puts it: “For each delivery, you will always receive at least $1 from DoorDash plus 100% of the customer tip. Where that sum is less than the guaranteed amount, DoorDash will provide a pay boost to make sure you receive the guaranteed amount. Where that sum is more than the guaranteed amount, you pocket the extra amount.” Thus, if the minimum amount a so-called “dasher” is owed is $6 for a delivery and the customer tips $5, Doordash only has to pay the driver $1. If the delivery worker is tipped $4, Doordash pays out $2. Only if the amount is more than $5 for that $6 delivery, does the dasher receive an actual tip.
In statements to the New York Times, both companies denied that the policies were deceptive. However, shortly after the article’s publication on February 6, Instacart reversed course in a statement from founder and CEO Apoorva Mehta published to Medium.
Among the changes, Mehta pledged to: keep tips separate from standard payments, have a higher guaranteed compensation floor for shoppers, and retroactively compensate shoppers for the lost income that resulted from its previous policy. “Specifically, we will proactively reach out to all shoppers who were adversely affected by instances in which Instacart’s payment was below the $10 threshold,” Mehta writes. “For example, if a shopper was paid $6 by Instacart, to compensate for our mistake, he or she will receive an additional $4 from Instacart.”
Going forward, Instacart shoppers will receive a minimum of $10 per order — including tips — and the platform will make up the difference if a tip isn’t high enough to surpass the $10 threshold. The company also plans to raise its minimum payment from $3 to between $7 and $10 depending on the region.
Eater has reached out to Doordash for comment regarding its pay structure for delivery workers.
While Instacart is making an about face due to public pressure, it’s not the first time that the company has come under scrutiny for its treatment of delivery workers. The Silicon Valley-based startup settled a class action lawsuit for $4.6 million in 2017. In the suit, independent contractors claimed 18 violations against the company including including improper tip pooling. As part of the settlement, Instacart agreed to change how it described a service fee on its platform, which many customers had misinterpreted as a tip. Some things never change.
• After Scrutiny, Instacart Will End Its Controversial Tipping Policy [Buzzfeed]
• Instacart and DoorDash’s Tip Policies Deliver Outrage [NYT]
• Why Instacart and Doordash Workers Don’t Always Receive the Tips You Give Them [NBC]
• All Delivery Coverage [E]