Couriers said they earned less money from the company whenever their tips were higher. They said tips were being used as subsidies to offset the costs the company incurs from wages.

With the rise of the gig economy comes new digital capital and new ways for employers to structure worker pay as reformists play catch-up in instilling regulations.

These practices are widespread in the online gig economy, causing scholars, policymakers and labor organizations to examine these issues at the local, national and international levels.

“(This) can actually be conceived as a form of wage theft this technology is enabling,” said Maria Figueroa, director of labor and policy research at the Worker Institute at Cornell University.

The online gig economy

The online gig economy is a sector of the economy that contains jobs performed by people who work as on-demand platform workers for companies such as Instacart, Uber, Lyft and other businesses that use smartphone apps as platforms.

Workers in the online gig economy make up just over 4 percent of jobs in the U.S. workforce, according to a JP Morgan Chase Institute study. There are between 7,018,890 to 7,345,350 online gig-economy jobs.

With Instacart, people apply online to become what Instacart says are independent contractors. They then each receive an Instacart shirt, card and a lanyard. Instacart partners with a variety of stores, including Wegmans, Aldi and CVS. The service is available throughout the Southern Tier.

The process begins when shoppers use the app to make their order. The couriers can see the standing orders and their estimated total payments for full-service batches and deliver-only batches, and decide which batches they would like to accept. A full-service batch requires the courier shop for and deliver the items, and usually yields more money than the delivery-only batches that are shopped by another person.

Different pay components, including batch incentives and mileage expenses, are added to the total sum workers were paid.

Prior to Instacart’s latest announcement, Tracy Catlin said she was once offered a 65-cent batch incentive and her total was $10 for a job. She rejected it.

“I’m not doing this to get rich, but I am doing this to pay my bills,” she said.

“It’s weird to change from making $200 a week to $38,” Tracy Catlin said. “Where’s the money going? Not in my pocket. At first, it was a great gig.”

‘Volunteering for Instacart’

For Instacart, customers can tip at two different times: when they placed the order and after the delivery.

Because customers are more familiar with tipping at the time of the order, that’s when they tip, and shoppers said the company used those tips to offset wages.

“At a certain point, it is volunteering for Instacart,” Pape said in a consultation with Pete Myers, coordinator for the Tompkins County Workers Center.

“That’s insidious,” Myers said. “We need to have a discussion on what standards we are willing to have as a society. Frankly, I think the standards are set low.”

The December payment structure change not only affected shoppers, but it affected customers as well.

Amber Duff, a 31-year-old mother of four children, said she had to wait only two hours for a delivery the first time she used Instacart when she lived in Horseheads. Duff, who now lives in Ithaca, said she used the app out of convenience so she would not have to take her young children to the grocery store.

“It was a very desirable service for people like me who can be stuck at home,” Duff said.

More recently, she has tried to make orders but realized she would have to wait two days for full-service deliveries.

“Instacart has gone to days ahead for orders. I don’t understand why they do that,” Duff said. “What I got from other moms is that I’m better off doing this myself.”

Instacart’s business practices were happening beyond the Southern Tier, as well. Couriers in Washington state and elsewhere also complained about the new pay structure, and a class-action lawsuit was filed against Instacart in California on Feb. 1.

Instacart “intentionally and maliciously misappropriated gratuities in order to pay plaintiff’s wages even though Instacart maintained that 100 percent of customer tips went directly to shoppers,” the lawsuit stated, according to an article in Packt Hub, the news division of an on-demand publishing company based in Birmingham, United Kingdom, and Mumbai. “Based on this representation, Instacart knew customers would believe their tips were being given to shoppers in addition to wages, not to supplement wages entirely.”

Contractor vs. employee

Michael Macomber, an attorney for Tully Rinckey, a law firm with offices throughout New York state, said he was not surprised to hear about the lawsuit in California because the company is trying to streamline its operations with independent contractors to reduce overhead.

Lawsuits can arise because of classification and the amount of control a company has over workers. Acts like threats of deactivation and pay reduction creates control and could make delivery drivers employees instead of independent contractors.

The shoppers can choose which jobs they would like to take, but they get tagged and receive reliability incidents if they reject enough jobs, ultimately losing their shifts.

“The question is have they (Instacart) controlled the worker enough so that they are now an employee?” Macomber said. “With Instacart, individuals get blocked out for rejecting a number of jobs. This changes control and the way you pay them. It tips the scale much closer to employee.”

Macomber said he expects there will be changes to legislation that will provide clarity on the status of an on-demand worker as an employee or independent contractor.

“As technology improves, the law catches up,” Macomber said.

At one point, the shoppers urged customers to tip 22 cents at the time of order to signify solidarity and express they will alter and/or provide a more adequate tip after the delivery, either on the app or in cash.

This is not the first time allegations of misdirected tips have been aimed at a company that provides services through an app.

In June, Square Inc., a mobile payment company based in San Francisco, settled a $2.2 million class-action lawsuit customers filed against Caviar, an app-based restaurant food delivery service that was acquired by Square. Customers alleged their tips did not go to the delivery drivers, but Jack Dorsey, CEO of both Square and Twitter, denied those allegations.

Macomber said he is certain there will be even more litigation in the future.

“The law is designed to protect employees so they are not taken advantage of,” Macomber said.

Representatives from Instacart and DoorDash, an on-demand food delivery service, admitted to The New York Times they count tips toward couriers’ guaranteed minimums.

Instacart: We’ve fallen short

Instacart announced on Feb. 6 it will once again change its pay structure, including its tip policy, and give back pay to shoppers who were affected.

“It’s become clear that we’ve fallen short in delivering on our promise to you,” wrote Apoorva Mehta, CEO and founder of Instacart, in an open letter to couriers. “… While our intention was to increase the guaranteed payment for small orders, we understand that the inclusion of tips as a part of this guarantee was misguided. We apologize for taking this approach … It’s our responsibility to change course quickly when we realize we’re on the wrong path, and we believe today’s changes are a step in the right direction.”

Since last year, the minimum batch payment portion of workers’ total earnings for one job has been $3. On Tuesday, Feb. 19, it will increase to $7 to $10 for full-service batches and $5 for delivery-only batches.

“What we want, in addition to our tips and fair pay, is for them to bring back item commission,” Pape said.

Figueroa said the couriers and organizations pressing Instacart prevailed in their efforts to persuade the company to change its course.

“It shows that companies can be responsible if people push them to be sensitive,” Figueroa said. “It is also illustrative of the fact that they do have the financial ability to do that. The great agencies in charge of employment laws are able to keep them accountable. I hope other companies in other areas follow this way and stop stealing from workers and pay them fairly.”

Lesson for all employers

Although much of the focus of improper payments has been concentrated on Instacart, all employers, whether traditional or on-demand platforms, should think twice about activities like tip theft and wage theft because agencies are bolstering their collaborative efforts and making new promises to crack down on these unfair practices.

On Feb. 5, Tompkins County District Attorney Matt Van Houten said he wants to prosecute the “most egregious cases” of wage theft in Tompkins County. Each year, workers throughout the U.S. lose $40 billion to $60 billion through wage theft.

“I’ve been a lawyer in Tompkins County for 23 years, and I have never been aware of a wage theft being prosecuted (in Tompkins County),” Van Houten said during a panel on fighting wage theft in Ithaca.

As to whether it should be prosecuted?

“Yes – it is criminal, it should be criminalized, it should be prosecuted,” Van Houten said.

The district attorney said he has to educate himself on wage theft prior to pursuing cases, but he expressed a strong desire and commitment to help workers who are terribly mistreated by their employers.

“To compare wage theft to someone who steals some clothing from Target, to me, wage theft is infinitely more serious and more egregious than those petty crimes,” Van Houten said. “I don’t think it will be practical to prosecute 100 wage theft cases, but if we can prosecute some, it sends a message. It should not be worthwhile to rob the wages of a person who is working paycheck to paycheck to make ends meet.”

While the Tompkins County District Attorney’s Office would like to prosecute wage theft, it appears the cases that would be prosecuted would more than likely be smaller-scale, local incidents, such as cases occurring at restaurants. If there is another incident similar to Instacart, in which individuals throughout the state or country are being mistreated, those cases would likely form class-action lawsuits that would be judged in a higher court.

And because issues throughout the gig economy are widespread, it looks like there is much that can be changed about the online gig economy.

As to whether Instacart shoppers and other online gig workers should form a union, Figueroa said yes, if it’s possible for them to do so. The National Labor Relations Act, which allows workers to form unions, covers only employees and not independent contractors.

However, there are exceptions. In New York City, Uber drivers can form a union. Seattle is another city where such unions can be formed.

“Having a union would be the ideal situation. Workers would be in more control and would have more power,” Figueroa said. “They need union representation. Unions empower people to express their own interests.”

And although on-demand platform workers are not in constant contact with each other on the job, Figueroa said she does not think this has to impede them from forming relationships and developing leadership as they attempt to form a union.

“Isolation is an issue, but there are ways to overcome that,” Figueroa said. “It sounds difficult, yes, they are isolated, but they are finding more ways to get together through social media. They tend to hang out in the same places.”