FALMOUTH, MA – APRIL 8: Instacart shopper Loralyn Geggatt makes a delivery to a customer’s home during the COVID-19 pandemic in Falmouth, MA on April 7, 2020. Some Amazon, Instacart and other workers protested for better wages, hazard pay and sick time. (Photo by David L. Ryan/The Boston Globe via Getty Images)
District of Columbia Attorney General Karl Racine announced a lawsuit Thursday against Instacart, claiming the grocery delivery service collected millions of dollars by deceiving customers into thinking that an optional service fee would be used as a tip for workers, when it allegedly went to the company instead.
The suit echos an earlier charge against food delivery service DoorDash. Racine sued DoorDash in November, alleging it pocketed tips meant for workers and deceived customers about where their money would be directed.
According to a press release announcing the suit, Instacart used to provide consumers an option to tip at checkout, with a default rate of 10% that users could adjust. But in 2016, according to the attorney general’s office, Instacart replaced the tip section with an optional service fee, placed in the same spot, with an adjustable 10% default rate. Instacart changed this practice in April 2018, according to the release, after media reports and contact from the attorney general’s office. Racine’s office alleges Instacart did not clearly disclose that those fees were optional and that they would cover Instacart’s delivery and operating expenses.
Although the alleged behavior happened years ago, the lawsuit comes as the coronavirus pandemic has renewed attention on the gig economy and workers who have labored through it. Some Instacart workers held a strike in March, demanding better pay and personal protective equipment (PPE) as they put themselves at risk to provide service. Instacart added additional pay and incentives as workers spoke out for safety measures.
The suit also alleges Instacart violated D.C. tax law by failing to collect hundreds of thousands of dollars in sales taxes on its delivery and service fees. The attorney general seeks restitution for customers who paid the allegedly deceptive fees and to collect the taxes he believes are owed to the district along with interest, civil penalties and costs.
“Instacart tricked District consumers into believing they were tipping grocery delivery workers when, in fact, the company was charging them extra fees and pocketing the money,” Racine said in a statement. “Instacart used these deceptive fees to cover its operating costs while simultaneously failing to pay D.C. sales taxes. We filed suit to force Instacart to honor its legal obligations, pay D.C. the taxes it owes, and return millions of dollars to District consumers the company deceived.”
“In our product, we disclose to customers that tips are always separate from and in addition to any service fees, and we clearly indicate that service fees go towards our operations,” Instacart said in a statement. “Additionally, 100% of customer tips always go to Instacart shoppers who are providing an important essential service for customers. We believe the accusations made in this complaint are without merit. We’re disappointed with today’s action by D.C. Attorney General Racine’s office and we welcome the opportunity to continue an open dialogue on these matters.”