Attorneys general in two jurisdictions are bringing down the hammer on delivery firm Shipt.
The company, which was acquired by Target (NYSE: TGT) for around $550 million in 2017, is under fire from attorneys general in the District of Columbia and Minnesota who allege that it wrongly classifies its workers as independent contractors rather than employees.
Announced Thursday, a lawsuit brought against Shipt by D.C. Attorney General Karl Racine was filed earlier this week. A statement from Racine’s office laid out six charges against the Target-owned firm, all of them stemming from a misclassification of workers.
“Increasingly, we’re seeing companies abuse hard-working district residents by fraudulently calling them independent contractors and, as a result, denying them wages and benefits they are legally owed,” said Racine. “At every step of the way, Shipt cheats, putting profits over workers and violating its employees’ basic rights just to make another dollar. We’re using all our authority to level the playing field and hold Shipt accountable for trying to cheat D.C. workers.”
The statement from the Office of the Attorney General breaks down the allegations further.
It notes that Shipt’s relationship with its workers — or “shoppers,” as it prefers to call them — has all of the hallmarks of an employer-employee relationship, pointing out that Shipt has the power to hire and fire at will and control and supervise shoppers through its app.
The statement also claims shoppers are economically dependent on Shipt. Because Shipt determines which orders are available and sets the earnings opportunity for each of them, the AG’s office argues that shoppers lack individual opportunity for profit or loss.
Combined, the office concluded, these aspects of the business make it inconceivable for workers to be classified as independent contractors rather than employees. Given that premise, it alleges that Shipt has denied shoppers key benefits and protections. Specifically, the statement mentions six of them:
- Failure to pay minimum wage in violation of the Minimum Wage Revision Act (MWRA).
- Failure to pay overtime in violation of the MWRA.
- Failure to provide paid sick leave in violation of the Sick and Safe Leave Act (SSLA).
- Failure to pay wages due in violation of the Wage Payment and Collection Law (WPCL).
- Failure to pay universal paid leave taxes in violation of the Universal Paid Leave Act (UPLA).
- Failure to secure workers’ compensation coverage in violation of the Workers Compensation Act (WCA).
“Shoppers with Shipt are independent contractors, and the flexibility that comes with being an independent contractor is the primary reason Shipt Shoppers choose to earn on our platform,” said Evangeline George, a Shipt spokesperson, told Modern Shipper in an email statement. “We strongly disagree with the action taken by the Attorney General for the District, and we’ll continue advocating for Shoppers and the opportunity to earn flexible income across the D.C. area.”
The district is demanding a trial by jury to settle the matter, and it’s not the only place where Shipt faces legal action.
On Monday, Minnesota Attorney General Keith Ellison announced that his state filed a similar lawsuit in Hennepin County District Court. Much like the statement handed down by Racine’s office, Ellison and the Office of the Attorney General of Minnesota say that Shipt has total control over its shoppers, from where and when they shop to how they get paid.
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Ellison’s office went on to argue that under the Minnesota Fair Labor Standards Act, those workers are already employees under the law. Accordingly, they should be given the benefits and protections of employees.
“I’m suing Shipt because, instead of playing by the rules most Minnesota employers play by, Shipt is taking advantage of Minnesotans to enrich itself while leaving workers to fend for themselves,” Ellison said in a statement. “Unlike other employees, these workers have no clarity on how much they will be paid day-to-day, and they often don’t receive the minimum wage and overtime they’re entitled to.”
Both lawsuits come as self-described gig companies nationwide face pressure from the legal system. Last month, the Federal Trade Commission released a policy statement reigniting its battle against companies like Uber, Lyft and Shipt. While the statement has no legal power, it laid out goals like combating misclassification and providing greater protections to workers.
“No matter how gig companies choose to classify them, gig workers are consumers entitled to protection under the laws we enforce,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection, in September. “We are fully committed to coordinating our consumer protection and competition enforcement efforts within the FTC as well as working with other agencies across the government to ensure gig workers are treated fairly.”
Workers for some of the apps have come out in support of the FTC’s position. Justice for App Workers, a New York City-based coalition of workers for platforms like Uber, Lyft and DoorDash, highlighted the importance of holding the apps accountable.
“Gig companies are on notice,” the coalition’s co-founders said in an e-mail statement last month. “Workers and regulators alike recognize that the unfair treatment we’re subjected to can no longer continue. As the FTC highlighted, app workers’ lack of bargaining power has deprived us of the fundamental right to negotiate over wages, benefits and working conditions.”
Story updated at 11:30 a.m. EST Friday with comment from Shipt.