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Instacart to Pay DC $2.5 Million in Lawsuit for Misued Consumer Tips

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Grocery delivery service Instacart has settled a lawsuit over misleading customers filed by the District for $2.54 million, DC Attorney General Karl Racine announced on Friday, August 19.

Racine filed the lawsuit in 2020, alleging that Instacart falsely led consumers to believe that service fees charged on orders would be tips intended for delivery staff from 2016 to 2018. However, the company used the tips to support its operations, and also failed to pay sales taxes, according to the lawsuit.

“DC consumers expect their tips to go to workers—not the c-suite,” Racine said in a release. “Any business operating in the District must provide consumers with truthful information, pay workers the wages and tips they have earned, and pay the sales taxes that they owe. Today’s settlement with Instacart sends a clear message: any company that attempts to dodge their obligations to workers and consumers will be held accountable.”

Around $1.8 million of the settlement will be paid to DC in compensation for affected delivery workers and consumers. It also includes litigation costs.

The court also ordered Instacart to put an end to its years-long claims that DC tax laws did not apply to it because of its business model. The company is now required to release $739,057 in previously-disputed tax payments, for which it had been seeking refunds.

In addition, Instacart will have to ensure that customer tips go directly to workers and that it doesn’t show any fees or tips on its website in a misleading way, the Office of the Attorney General (OAG) said.

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