Instacart sues Seattle over “premium pay” ordinance

Last Friday Instacart, the grocery-delivery company, sued the City of Seattle over the recently-enacted ordinance that requires the company and its peers to give “premium pay” to its gig workers during the COVID emergency.

 

Instacart was joined in the suit by the Washington Food Industry Association, a trade association whose members include Instacart and other food and grocery delivery businesses as well as grocery stores.

The “premium pay” ordinance required restaurant, food and grocery delivery companies to pay their gig workers an extra $2.50 per trip to offset their time and expense required to clean their vehicle between trips.  Originally the ordinance included Uber, Lyft and other “TNCs” as well, but in a nod to the labor organizations currently negotiating a separate minimum wage for those drivers they were removed from the legislation by amendment. Mayor Durkan signed the bill last Friday, which was passed as emergency legislation and so took effect immediately.

The case was filed in King County Superior Court and asserts that the ordinance violates both state and federal laws:

1. They argue that it violates State Initiative 1634, which was intended to stop local jurisdictions form passing taxes on groceries similar to Seattle’s soda tax. This is going to be an interesting exercise in parsing the initiative’s language: while on the surface it seems like it doesn’t apply because the “premium pay” is compensation to the workers and not a tax collected by the government, an examination of the precise language in the bill might lead to a different conclusion. The bill reads:

… a local governmental entity may not impose or collect any tax, fee, or other assessment on groceries.

“Tax, fee, or other assessment on groceries” includes, but is not limited to, a sales tax, gross receipts tax, business and occupation tax, business license tax, excise tax, privilege tax, or any other similar levy, charge, or exaction of any kind on groceries or the manufacture, distribution, sale, possession, ownership, transfer, transportation, container, use, or consumption thereof.

The plaintiffs argue that the premium pay requirement is a “charge or exaction” on the sale and transportation of groceries and is therefore prohibited. That’s not entirely implausible, but still a stretch since the city isn’t exacting it for itself — it’s much more akin to a minimum wage. But in reading the rest of I-1634, we also see that there is an important exemption:

Nothing in this section prohibits the imposition and collection of a tax, fee, or other assessment on groceries if:

(a) The tax, fee, or other assessment is generally applicable to a broad range of businesses and business activity; and

(b) The tax, fee, or other assessment does not establish or rely on a classification related to or involving groceries or a subset of groceries for purposes of establishing or otherwise resulting in a higher tax rate due to such classification.

The premium pay ordinance almost certainly meets this requirement. So in all, this asserted violation is fairly weak and the plaintiffs will have a difficult time succeeding with it.

2. The plaintiffs argue that the city exceeded its emergency police powers in passing the ordinance because it is not necessary to the public health, welfare of safety as the legislation claims. They argue that during the COVID emergency their business — and accordingly their workers’ business — has boomed, and those workers are now averaging around $30 per hour. In addition, they assert that the city’s singling out of food delivery companies but not other businesses to impose the premium pay was “arbitrary and irrational.” Finally, they argue that “Instacart and WFIA’s members will suffer economic injury as a direct result of the Ordinance’s intrusions on their rights to control and manage their business operations and contractual relationships.”

3. The plaintiffs assert that the ordinance is an illegal taking of private property without just compensation, because it interferes with the companies’ contract rights (a form of intangible property) by prohibiting them from modifying the areas of the city served or from passing through the charges to their customers. They argue that the city is forcing them to provide food-delivery services below their cost. This, they argue, is a violation of the Fourteenth Amendment to the U.S. Constitution, as well as of the Washington State Constitution.

4. The plaintiffs argue that the ordinance violates the equal protection clause of the Fourteenth Amendment: it singles out food delivery companies’ workers “because they allegedly confront special health hazards in their line of work; but because these workers have no passengers and are not near other people when driving, they face lower risks of infection than the grocery store workers who spend their entire day in the stores, or food workers in restaurants who deal with customers in person or who deliver food to customers, or transportation network drivers who transport passengers in the close confines of their vehicle for hire.” Thus, they argue, there is no rational basis for singling out these companies for a premium pay requirement.

Instacart and WFIA are asking the court for:

  • a declaratory judgment that the “premium pay” ordinance is illegal, invalid and unenforceable, for each of the reasons stated above;
  • damages “for the financial and economic injuries it will suffer… including the marginal cost of premium pay that it is prohibited from recouping from its customers;
  • preliminary and permanent injunctions preventing the city from taking steps to implement and enforce the premium pay ordinance.

The plaintiffs are being represented by former state Attorney General Rob McKenna.

The City Attorney’s Office said that they are reviewing the suit, but offered no other comment.


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One comment

  1. the fourth claim may be their winner on constitutional grounds. they are accurate that drivers have less contact than other workers in the food industry and in fact they offer contact-less delivery meaning the worker never gets close to the 6 foot recommended distancing from CDC.

    As a note Instacart has tacked on a new fee to plan subscribers that enacts at their automatic renewal. I just found this out. They call it a “reduced surcharge” but it is nothing more than a new fee to pass on this, and other, costs to their users.

    I hope Instacart loses but I don’t think that will happen

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