The Minnesota Attorney General has sued Shipt alleging that Shipt ‘Shoppers’ were misclassified as independent contractors.
October 24, 2022 (SAINT PAUL) —Minnesota Attorney General Keith Ellison announced today that he has filed a lawsuit in Hennepin County District Court against gig-economy company Shipt, Inc., alleging that it has misclassified its delivery workers — which it refers to as “Shoppers” — as independent contractors to avoid the cost of providing them with the employment protections guaranteed by Minnesota law. The announcement comes in conjunction with the filing of a similar lawsuit against Shipt by District of Columbia Attorney General Karl Racine. Both lawsuits challenge Shipt’s decision to misclassify workers to avoid labor costs.
Shipt’s business is to provide in-store shopping and home delivery of groceries and other goods to its customers. By misclassifying Shoppers as independent contractors, Shipt has deprived hundreds — potentially thousands — of Shoppers in Minnesota of state and local minimum wage protections, local sick and safe time protections, overtime protections, and state law protections that guarantee employees know with certainty what they will be paid for the work they perform. Shipt’s worker misclassification also prevents misclassified employees from accessing state unemployment insurance and workers’ compensation benefits.
Many workers work for gig-economy companies because they like the flexible schedule that the work provides. Companies like Shipt suggest that being an independent contractor is a necessary tradeoff for having a flexible work schedule, but that simply is not true. The ability to set one’s own hours of work is just one small part of the calculus to determining whether someone is an employee or an independent contractor under Minnesota law. In an economy where flexible and remote work is becoming more and more common, it is increasingly clear that an employer’s control of the work performed is far more significant than when the work is performed.
“Every Minnesota worker, especially those who were essential to all of us during and after the worst days of Covid, should take home every dollar they earn under the law — no exceptions. But some companies break the rules and the law by misclassifying their employees as independent contractors, which means those workers miss out of some of the law’s most basic protections while Shipt unfairly enriches itself. That’s wrong anytime — and at a time when so many Minnesotans are struggling to afford their lives, it’s offensive,” Attorney General Ellison said.
“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. 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.
“One of the core responsibilities of the Attorney General’s office is to enforce the law to protect Minnesota workers and consumers whenever their rights are undermined. That’s what I’ve done here,” Attorney General Ellison continued.
Investigation and allegations
The Attorney General’s investigation into Shipt’s employment practices revealed that, despite Shipt’s public claims that its “Shoppers” are independent contractors who run their own businesses, Shipt controls virtually every facet of a Shopper’s work, leaves them with no ability to set the terms of their work, and does not allow them to create independent, self-sustaining businesses outside of Shipt’s proprietary mobile application.
Shipt’s contract with workers also makes it virtually impossible for workers to fix the problem of Shipt’s misclassification on their own. Shipt’s form contract includes a binding arbitration agreement and a class action waiver that make it impossible for Shoppers to take issues of misclassification to court or band together to challenge Shipt’s illegal misclassification scheme.
The lawsuit alleges that, despite Shipt’s characterization of Shoppers as independent businesspeople, Shipt determines who is eligible to be a Shopper and controls customer access to Shoppers and vice versa. Shipt monitors Shopper performance in granular detail. Shipt — not Shoppers — set the markup for goods ordered through its service, allowing no room for Shoppers to profit because of their business acumen or customer relationships. Shipt even limits how Shoppers can communicate with customers, masking both customer and Shopper numbers from each other while Shoppers perform their work.
“I have always stood with Minnesota’s workers and today I especially thank every essential Shipt worker who spoke to my office about Shipt’s unfair employment practices,” Attorney General Ellison concluded. “Shipt has modeled its entire business on shifting its duties and obligations as an employer from itself onto its workers, even though Shipt could not exist without its ‘Shoppers.’ On top of that, Shipt has done everything it can to make sure that workers have no power to fix this unfair system of misclassification on their own. That is why the Attorney General’s Office had to step in.”