The Attorney General for the District of Columbia announched a lawsuit against Shipt alleging that Shipt misclassified workers as independent contractors.
Lawsuit Seeks to Return Hard Earned Wages to DC Workers and Fight Alarming Increase of Worker Misclassification Fraud
WASHINGTON, D.C. – Attorney General Karl A. Racine today announced a new lawsuit against Shipt, a gig company that offers shopping and delivery services, for denying full-time workers basic employment rights by deploying an increasingly prevalent misclassification scheme through which employers cheat employees out of hard-earned wages and benefits, deny safety protections, avoid legal obligations to pay into public programs, and shift routine business costs onto 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 AG 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 DC workers.”
Another state attorney general is expected to file a similar lawsuit against Shipt later today.
A district worker’s classification as an employee or independent contractor determines whether the worker is eligible for basic employment rights, such as the right to minimum-wage and overtime pay, paid sick leave, and workers’ compensation. By misclassifying workers as independent contractors, employers cheat employees out of money and benefits they are rightfully owed in order to reduce labor costs and increase profits. Additionally, such schemes put businesses that follow the rules at a competitive disadvantage.
Employers who misclassify workers also cheat the District out of significant tax revenue, harming the public by avoiding paying into programs funded by payroll taxes, which are calculated as a percentage of wages paid by employers to employees. In addition to federal Social Security and Medicare taxes, these payroll taxes include the District’s unemployment insurance tax, which provides financial assistance to unemployed workers, and paid family leave tax, which allows workers to care for newborn children or tend to a serious health condition.
These fraudulent schemes are being used more frequently in the District and across the country and the Office of the Attorney General (OAG) is proud to have taken the lead in addressing this issue and holding employers accountable.
Background on OAG’s Lawsuit Against Shipt
Shipt’s business model depends on misclassifying its delivery drivers as independent contractors even though they bear all the hallmarks of full employees. Through this fraudulent and unlawful scheme, Shipt increases its profits by refusing to pay workers what they are owed and evading basic employment requirements for its core employees such as minimum wage, overtime pay, and paid sick leave. Shipt also evades its obligations to pay what it owes to District programs, including paid family leave and workers’ compensation.
Shipt refers to its delivery drivers as “shoppers” and lures new recruits in with enticing advertisements such as “be your own boss” and “set your own hours for a completely flexible schedule.” In reality, Shipt shoppers have to sign up for work shifts well in advance to receive orders, and even when a shopper signs up for a shift, they aren’t guaranteed any orders. Because shoppers only get paid based on deliveries made, shoppers are often not compensated at all for the hours they work.
With this lawsuit, OAG is seeking to:
- Recover all unpaid wages and paid sick leave owed to Shipt’s employees;
- Force Shipt to fulfill its legal obligation to pay into the District’s public programs; and
- Recover damages and penalties for Shipt’s unlawful conduct.
OAG’s Allegations Against Shipt
OAG alleges that Shipt’s employment practices violate District law on seven counts:
- Failure to pay minimum wage in violation of the Minimum Wage Revision Act (MWRA);
- Failure to pay overtime in violation of the Minimum Wage Revision Act (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).
A copy of the complaint is available here.
This matter is being handled by Assistant Attorneys General Sarah Levine, Charlie Sinks, and Randy Chen and Section Chief Graham Lake of the Workers’ Rights and Antifraud Section of OAG.