DC sues Shipt for misclassifying drivers as independent contractors

DC Attorney General Karl Racine appears before the US Supreme Court. | Photo by Alex Wong/Getty Images

DC Attorney General Karl Racine sued Shipt, a gig delivery company, Thursday for misclassifying full-time workers as independent contractors in order to “cheat” them out of wages and avoid payroll taxes.

In the Thursday complaint, Racine accuses Shipt of unlawfully denying full-time delivery workers basic employment benefits and protections by wrongfully classifying them as contractors. Specifically, the suit claims that Shipt misrepresents the nature of a delivery driver’s work, suggesting that the worker acts as their “own boss.” But in reality, drivers are required to sign up for hourly shifts, and the amount of money they make depends on the number of orders placed within that timeframe. If no orders are placed, drivers don’t turn a profit and could even operate at a loss, Racine argued in the complaint, alleging Shipt’s business model violates DC’s minimum wage laws.

“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,” Racine said in a statement Thursday. “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.”

The lawsuit comes as the Biden administration is preparing to make it harder for gig companies like Uber and DoorDash to hire workers as independent contractors. Earlier this month, the Department of Labor proposed a new regulation that would force gig companies to classify workers as employees depending on the amount of time they’ve worked at the company, their specific role, and whether the individuals could operate at a loss on their own.

“While independent contractors have an important role in our economy, we have seen in many cases that employers misclassify their employees as independent contractors, particularly among our nation’s most vulnerable workers,” Secretary of Labor Marty Walsh said in a statement this month. “Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages.”

The Labor Department’s rule has yet to go into effect and could take months to finalize. But even if it is approved, states would have the authority to create their own laws regulating employment status at gig companies.