Dive Brief:

• E-commerce grocery provider Instacart has agreed to pay $4.6 million to former workers who brought a class action lawsuit against the company for improper handling of tips, neglecting to pay business expenses and 16 other charges, according to Recode.
• Three defendants closely involved with the case will each receive $5,000, while defendants named in the suit will receive $500 or $1,000. The majority of workers will earn a few hundred dollars from the agreement.
• As part of the settlement, Instacart agreed to clarify its service fees, which workers criticized for appearing to provide tips when in fact they did not, as well as formalize the process whereby it can “deactivate” workers.

Dive Insight:

For a company valued at more than $3 billion, a settlement of this size doesn’t inflict much financial pain. But it is an unnecessary distraction for Instacart, and bad press that could stick with consumers who value how a company treats its workers.

A bit of background: In September of last year, Instacart removed online tipping from its service and substituted a service fee to be collected by the company. Instacart claimed the move would allow it to more evenly and reliably pay its workers, whom it felt were too reliant on tips. But workers quickly expressed their displeasure with what they saw as an attempt by the company to dip into the extra revenue they were generating. Instacart agreed to reinstate tipping, but it did so while also keeping its service fee in place. According to workers, the prominent positioning of the service fee at checkout led many customers to believe it was a tipping tool, when in fact it wasn’t.

In the rising gig economy, workers and companies are bound to clash as both sides figure out how to approach payment, benefits, classification, and so on. But Instacart has been particularly meddlesome with its business model, frequently changing its delivery and pickup options, in addition to its worker payment system, as it’s grown. It’s imperative to innovate and find the model that works best, but Instacart seems to have taken for granted the human element that fuels its business.

With the newly announced settlement, Instacart has a chance to codify some important procedures. Moreover, it has the chance to show good faith and consistency to the workers that pick and deliver products for the company.