This Is How Instacart Is Reclassifying Contract Workers as Part-Time Employees The on-demand grocery delivery company expects three-fourths of eligible workers to make the transition.

By Laura Entis

Opinions expressed by Entrepreneur contributors are their own.

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Earlier this week, on-demand grocery delivery service Instacart announced that its in-store workers in Atlanta, Miami and Washington, D.C. can apply to become part-time employees (instead of independent contractors), an option that is already available for workers in Boston and Chicago. The company says it plans on expanding this program to more of the 16 cities in which it currently operates, a list that includes New York, Los Angeles, Portland, Austin and Boulder.

Instacart's new policy comes at a pivotal time for the sharing economy, as a slew of recent lawsuits against Uber, Handy and yes, Instacart, has brought the legality of these companies classifying workers as contractors not employees into question.

Reclassifying its workers is going to cost Instacart. More than 75 percent of eligible in-store workers are expected to apply for part-time employee positions, according to company spokesperson Andrea Saul, and Instacart will be responsible for their workers compensation and payroll taxes, including unemployment, social security, and Medicare. Instacart currently has about 250 full-time employees, several hundred part-time employees – a number that will expand as the company brings expands its reclassification program -- and more than 7,000 contract workers.

The company will also pay part-time employees hourly wages regardless of customer volume, which according to Saul, will vary by city but is above the local minimum wage in all regions. "Because of things like tips and commission, they have the opportunity to make more than that," she added.

Related: After Many Strikeouts, a $44 Million Home Run

When Instacart was launched in 2012, co-founder and CEO Apoorva Mehta focused on the service's human element. A former Amazon employee, Mehta said that while he admired the company's logistical mastery, he was put off by its antiseptic vibe. "There's no face to Amazon," he said last summer. "With Instacart [shoppers] are people who are part of our community. That personal touch, in my opinion, is a huge edge."

Recently, Instacart changed its business model, dividing the roles of grocery shopping and grocery delivery into two separate positions. While a smart tactical decision – shoppers are stationed in stores, and can thus purchase more orders more quickly -- it leaches much (if not all) of that personal touch Mehta referenced above. Only in-store shoppers, not drivers, are eligible to become part-time employees.

"When you look at the difficulty of shopping, picking and delivering items such as fruit or eggs that need to be carefully selected, you realize that grocery shopping can be complicated. For this reason, we want to provide supervision and training, which can only be done with employees," Mehta said in a statement when the program was first announced.

Instacart has raised $275 million, and is valued at $2 billion.

Related: Employee, Not Contractor: What the Uber Ruling Means for the Sharing Economy

Wavy Line
Laura Entis is a reporter for's Venture section.

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