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Instacart CEO apologizes for tipping debacle (techcrunch.com)
99 points by Reedx 9 days ago | hide | past | web | favorite | 105 comments

What I hate about company behavior is the lack of leadership compass in knowing what is right and wrong, and instead treating every resource (person) as an experiment to see what they'll accept or not. And if they don't hear enough complaints, must've been ok to do.

You can read it in their apologies and the positive spin: "We heard loud and clear the frustration when your compensation didn’t match the effort you put forth."

Heard you loud and clear? What is this, like the American Idol voting contest? Daytime Emmy awards, or public opinion poll, where we have to be asked what we like to be paid?

A proper apology would be: "We know what we were doing was wrong, and we were wrong to do it, and we will not do things like that in the future." Not, "it seems you didn't like what we did, so we'll do something different."

Makes you think they won't apologize for doing fundamentally wrong things until they get called out by public opinion. What types of issues should a company know are not ok / illegal, and what issues are subject to public approval or measuring reception? Shouldn't a CEO know these and apologize accordingly?

Or maybe that is the role of regulation and government to keep the amoral corporate compass calibrated.

And rest assured! The responsible parties (i.e. the ones complaining loudly) will be sacked... just as soon as we get out of this spotlight.

The people responsible for sacking those people have themselves just been sacked.

We apologize for the lack of professionalism, the above commentor has been sacked - and apparently I have too, it's all a lie-

The voice to text program used to generate the above has been sacked.

>Or maybe that is the role of regulation and government to keep the amoral corporate compass calibrated.

That's one of the reasons for government regulation and why you should carefully examine calls for "less government regulation" to see who benefits and who is worse off.

There's an entire industry dedicated to telling these people how to say these things. I'm confident a consultant provided the exact wording in order to find the best (least bad) long term outcome.

To be fair, there is also an entire industry that seizes on genuine expressions of contrition and accountability in order to launch wildly speculative lawsuits, esp. in the USA. The one goes with the other.

It should be assumed that company will try to do these kind of thing unless they are forced to do otherwise. Yes it's your role or goverment role to do so

It is nice of the customers and employees to express their public complaints about it. More often than not, they just silently leave the platform and will never come back again. Expressing public complaints is a hell more work than jumping to another platform.

it's not just about people, it's about everything. A company is like an organic entity trying to grow at all cost. It cut corners, it finds loopholes, it even does illegal stuff if it has to. But this is not their fault, it is incentivized by the free market and by capitalism.

I'm not sure what's the right answer here. Changing the incentives? Or penalizing companies (that's what we do)? I don't think we're getting rid of the free market any time soon.

“After launching our new earnings structure this past October, we noticed that there were small batches where shoppers weren’t earning enough for their time” ... Dude really?

So you create an earnings structure that deliberately fucks your workforce, but it's just something overseen, just recently "noticed", and it only affects "small batches" of shoppers?

This is just plain dishonesty.

Not to mention, he didn't even address the customer's who were defrauded when instacart told us that our "tips" were "100%" going to the shopper.

I'm glad he's making things right for the shoppers, they were hurt the most. But he didn't even apologize to us customers who thought we were tipping our shoppers well, and instead we were paying their base salary (instacart would just make up the difference if we didn't "tip" enough). WTF? That's not a tip!

After seeing his response, I'm glad I closed my account when this news broke and I won't be returning. They had one opportunity to nail this PR disaster and they forgot about their customers!

i stopped using Instacart too for this same reason. i might start to use them again if they refunded all customers all of their tips and paid all of the shoppers a significant extra bonus, as a good faith measure. otherwise, there are better ways to get a few groceries...

"We're sorry that we got caught."

Classic example of begging for forgiveness rather than asking for permission (alt: move fast and break things). They've got enough capital to apologize with money. It was worth the risk fiscally but we'll see how their brand fares after this settles (probably just fine).

> For the shoppers who were subject that approach, Instacart says it will retroactively pay people whose tips were included in payment minimums.

Yep. The Silicon Valley Model.

Break the law and be as unscrupulous until we can either change the law, have enough money/market to "fix it" and save face, or fight indefinitely in court.

Silicon Valley? The restaurant business started the model of screwing employees and paying them less. I don’t give why ever is okay with it

This is not up-front lower pay with the expectation of tips. This is low pay where tips effectively go to the company, not the worker.

I would not be OK with it if I tipped at a restaurant and the restaurant reduced the staff's pay by the amount I tipped.

Wage theft of exactly the form Instacart perpetuated has existed in the restaurant industry for a long time. This is not a Silicon Valley innovation. It's even enshrined into law in some US states, known as a "server wage."

If the restaurant is paying less than minimum wage - which many (perhaps most, in some areas) do - then that's exactly what's happening.

You don't really mean "exactly what's happening". You mean "approximately what's happening, averaged across everyone's tips." Which is still not true, because people know the restaurant situation up front, while this situation goes against expectations.

No, GP was right the first time. "Server wage" is exactly this — the employer pays less than the nominal minimum wage, and tips from customers are appropriated to make up the difference.

Server wage: Workers and customers know up front that base pay is lower. Customers expect that their tips will go to the worker in addition to base pay.

This: Base pay starts low, and is reduced by the tip amount, contrary to the expectations of customers and workers.

Now is it clear how they are two different things?

I think you're misrepresenting server wage.

To style it like your comment, server wage: Base pay starts low (minimum wage), and is reduced by the tip amount. Customers may or may not be aware that servers are paid below minimum wage and that their tips will be appropriated by the business. Businesses don't exactly advertise this.

I couldn't find where any law enshrined businesses appropriating tips. I googled server wage and just found https://en.wikipedia.org/wiki/Tipped_wage

If there's something enshrined in law beyond a lower minimum wage for tipped workers I'm interested to know.

Say I'm a tipped worker making $3/hour in an area with a minimum wage of $10/hour.

I work for an hour and don't receive any tips. My employer has to pay me $10 to comply with minimum wage laws.

I work for another hour and receive $5 in tips. My employer now has to pay me $5 so that my total pay for the hour is $10. I make the same amount in wages + tips that I did in the first hour, but my employer saves $5.

Yes, but if that goes on you get fired. The restaurant probably isn't expecting to pay you anything more than the $3/hour.

There's lots of jobs, like commissioned sales, where the employer has to pay minimum wage. They get rid of salespeople who may do a great job of relating to the customer and explaining the benefits but can't close the sale. Out the door for somebody who is pushy, etc.

Yes, that's precisely what I'm talking about.

> a lower minimum wage for tipped workers

Money is fungible; reducing paid wage by the amount tipped (to a limit) is the same as just paying minimum wage and taking that portion of the tip from the worker.

yeah, but workers in a restaurant aren’t exactly having their financial expectations shattered.

I think his point is that SV has had a lot of companies lately which ignore regulations that are inconvenient.

This helps them grow when they are are small, and then when they get bigger they can either fight it in court, lobby, etc.

For example, Airbnb, Uber, Lime, etc.

I think the point there was Silicon Valley is not unique in this. Many other industries have used similar tactics for years.

  The Silicon Valley Model
"Move fast and break things. People, mainly."

Screw tipping culture. This expectation of a tip by default is a retarded(archaic, slow, ancient) cultural element.

If I HAVE to tip for an adequate service, then it should be included. If adequate service isn't delivered - then that should be reported to the management. If service that is above and beyond is delivered - then I will gladly pay for the extra service.(And I mean above and beyond, not just literally doing the job as stated)

These drivers aren't even entitled to minimum wage protections, let alone car maintenance and gas. While I agree that tipping is a bad form of compensation because it is so volatile, this is the only way folks like this are keeping their head above water.

This is the only solid rebuttal I've ever really seen someone come up with when seeing complaints about tipping, but my general response still applies: The reason I "buy" from a company/service is so I don't need to worry about "how" my request gets completed. If I need to pay your employee/contractors, i might as well look at hiring them directly and skip the middle-man taking a cut. I'm not your HR department, pay them properly and don't expect me to tip them based on my judgement of their performance.

I fully agree. It's going to be a while before tipping goes away, but it's being recognized more and more as a problem. Restaurants that get rid of it are usually seen positively. There's a successful brewery in Seattle that has a no-tipping policy. The beers are about a $1 more than elsewhere, so you pay the same. The employees are also paid more in regular wages to make up for this. Everybody wins: The employees make about the same except with more stability, and there is no awkwardness.

Tipping in restaurants is really problematic especially due to issues with tipping out the back.

> The employees make about the same except with more stability, and there is no awkwardness.

This is my biggest gripe with tipping. It's just a crappy experience as a consumer, and a weird power dynamic for the employee. Promotes class divisions, and makes me feel kind of crappy. I just want everyone to get a fair deal and thats it...

There are a bunch of lists about no-tipping restaurants in San Francisco: https://www.zagat.com/b/12-no-tip-eateries-in-san-francisco

I'm going through all of them. I tried Zazie the other day and it was really good :) Trying Petit crenn soon.

Can someone explain to me why we shouldn't all stop tipping tomorrow?

I don't think in general food delivery drivers get compensated for gas so that would be just about the only time I personally would feel obliged to tip - and I mean in places where things are fair, not the U.S. Otherwise I think tipping is a thing people should probably stop doing, or at least to the extent they feel obliged. I've gladly tipped people sometimes when I feel like they went out of their way, but the stigma has to stop.

So you stole, got caught, and all you did was give the money back and say you'll stop stealing?

If one of their drivers had come to the Instacart office and stolen something, they'd have to do all of the above plus go to jail.

This was a widespread coordinated criminal action and someone should be facing our criminal justice system as a result.

I find the use of "we" as a CEO to be disingenuous. Being the head of the company means taking ownership for your company's actions and I feel at that level you don't get to deflect to "we".

Pretty basic for good leaders:

When the organization is doing good it's We

When the organization is doing bad it's Me

I wholeheartedly agree and should have better articulated my comment to mention that deflecting to "we" is acceptable when the company does something well!

For tech companies, you might say it's the Reverse - CW's The Flash.

Eobard Thawne?

IDK, maybe the "we" goes beyond Instacart

to me, as a customer, the vendor-partners (e.g. Costco, BevMo, Ralphs, Whole Foods, CVS, Petco, etc) also seem a bit dirty. i mean, one can ask the question whether they were totally ignorant of Instacart's payment and tip related practices.

Instacart have been playing these games for years now [1]. They're not going to stop. They will squeeze their contractors until they meet resistance, then issue an apology and repeat. There are no long-term consequences, or at least any that they fear.

1. https://www.recode.net/2017/2/20/14503128/instacart-service-...

Not what I expected, it seems to me the CEO did the right thing. I'm not a customer of Instacart, my only knowledge of it comes from following the various HN stories about this whole ordeal.

The "right thing" he did:

1) Apologize, explaining that he made a mistake. Self-deprecation is good here.

2) Make it right, not just going forward - they are retroactively paying the delta to the impacted employees.

1) Apologize, explaining that he made a mistake. Self-deprecation is good here.

"Hey - we tried to cheat you blind. We thought we could cheat you without you noticing. Clearly that was a mistake - you noticed. I'm sorry that you noticed when we tried to cheat you."

2) Make it right, not just going forward - they are retroactively paying the delta to the impacted employees.

"The state attorney general's office phoned me and it was scary. I'm going to return the money that we cheated you out of because I don't want to go to jail."

"In the future, I promise to not cheat you in ways that you will notice."

so brilliant and so true

if I were advising this CEO, I'd suggest sending every shopper who ever got a tip an additional 50% of their lifetime Instacart earnings, just to regain the community's confidence.

They were caught stealing from their employees/contractors. Did the right thing? They are pleading forgiveness for abhorrent behavior, let's not sugar coat this.

Also stealing from their customers. They told us our tips were "100%" going to the shopper. Really, only the percentage that exceeded the base pay was going to the shopper because instacart was reducing their base pay by the amount of the tip. If that's not fraud, I don't know what is.

How is it stealing if you agreed to their terms? The contractors still got paid.

That would be more than enough if this was an accident -- but it wasn't. Dropping compensation when a customer tips is a deliberate choice that required engineering time and manager signoff to implement and ship. Building and shipping this feature was a calculated, deliberate decision.

Who made this choice, and how has the company changed things to ensure that they won't make this choice again?

How do you know that though? Simplest solution would be that that for each order, pay out $10 whether there were enough tips or not.

Instacart potentially thought that they are just guaranteeing a specific tip, regardless if there are tips or not, and not really thinking the model through. If a pizza delivery guy gets tipped nothing, or $1, I don't think the pizza company compensates? In some way you could see this an equalizing tips, everyone gets paid the same for each batch, as you would potentially do with normal wages.

Bigger issue for me coming from non-tip culture, that's ok not to pay any kind of employees enough and instead rely on customers to tip them.

The pizza company pays the delivery driver an hourly wage and possibly some compensation for mileage driven. The tip is added on top of the base compensation.

Your proposed simplest solution isn't guaranteeing a minimum tip. It's saying that the first $x of a customer's tip will go to the company instead of the employee. This is theft. The company already charged the customer a fee for this service and should be using this to pay their expenses.

It’s difficult to imagine thinking those words and not considering “what if there’s more than enough tips” to which was added “we’ll keep them, and lie to everyone.”

It's depressing when paying back the money you stole and apologizing is "not what I expected" in a good way. Jumping over the world's lowest bar.

The Right Thing would be not stealing from your employees' (contractors'?) tips in the first place

I think most people get the impression that they would rather still be doing this, if only there hadn't been a social media outcry.

Doing the right thing after significant public outcry still seems wrong.

The time to do the right thing has already passed. What you are observing is called "damage control" after it has been found that company was not, in fact, doing the right thing.

As I posted elsewhere - the apology misses half of the equation. Instacart was putting a tip section of the app to fool users into thinking that improved the wage of their workers when it kept to stable. So not only were they stealing from their workers they were stealing from their customers. Where's the apology for using the word tip deceptively?

Why did the gig economy pick up tipping culture? Why did Instacart need to?

I've read about why tipping exists in the restaurant industry and what happens to businesses that try to avoid it. But for these new businesses without established mores, I have to do moral calculus to decide whether to use them and how to tip. I wish they had avoided this. I tend to avoid them instead.

Did customers ask for this? The people providing the services?

Was it for the price discrimination? price discovery? Or to deflate the sticker price?

I wonder if this starts organically: some customers paid tips in cash to their "shoppers", word gets around, people see other gig apps accepting tips, and so Instacart follows suit and adds this feature.

Perhaps it's a legal cover? If enough customers are paying cash tips, is it in Instacart's best interest to keep track of this (by building a tip feature into the app) for tax reasons?

Originally Uber didn't allow tipping. I think it was at the request of the drivers, ironically, though I could be wrong.

I'm guessing it's precisely to reduce wages and keep them low. The whole tipping is dumb and adds friction to the service. Just charge all-inclusive price. I am the same avoiding services that require tipping.

Too late, I've already decided to never use their service because of this.

Just curious, did you use Instacart or any of their competitors before this?

Does amazon's grocery service count?

Separately was I about to sign up for instacart through www.bjs.com before this story dropped.

Amazon's grocery and restaurant service also has a variable base rate that depends on tips as well. FYI.

And they've treated employees worse than this.

Thanks for taking the time to reply - this story is a good reminder to treat employees/all people as well as you can, not conditionally.

Do you think there's anything the CEO could have said/done today that would make you reconsider Instacart? I do like the retroactive payments he mentioned, but wonder if the there's anything more they could do to regain a customer like you.

In Austin, the local grocery chain (HEB) has started its own delivery service in addition to being available over Instacart. Prices for their service (hebtoyou.com) are lower though delivery+shopper fees are comparable. The experience is still a bit raw (substitute specification) but pretty comparable.

I wonder if it was really a set of collective decisions like this that drove the change and apology?


Instacart waited over a week since news of this first broke to issue this kind of an apology and change their course - they only did so after Buzzfeed and the NYTimes started to give the story more visibility. So not only was their decision to pay employees this way a conscious one, but so was choosing to respond not when they realized that their "contractors" felt screwed, but when too many of their customers would be aware of the issue and it became a PR concern.

They can apologize all they want, that's fine. But apologies don't always necessitate forgiveness. An apology is a start, and their actions going forward are what will truly determine whether or not people should forgive them.

If you kick someone in the groin because someone said they'd pay you 20 dollars to do it. Then apologizing is the right thing to do. But don't expect the victim to forgive you just because you apologize, not even if you give the 20 dollars back to whoever paid you in the first place.

Instacart isn't a person.

"We're sorry we got caught." This sort of thing is why socialism now has a higher positivity rating among under-30's than capitalism does.

Notice people found out about this last week, but the CEO waited to apologize and make promises until the New York Times published a scathing article about it this morning.

I don't understand how he could have expected to get away with that. It's so deceitful to his employees as well as his customers. It makes me wonder what other shortcuts Instacart and Doordash will do in the future, now that they're caught.

Too late: I now know how the company thinks about its employees and, frankly how truthful they are with their customers too.

So more Instacart and no more DoorDash. There are plenty of alternatives to both and I suspect we'll pretty quickly figure out which ones are the creepy assholes and which differentiate themselves by being decent human beings.

BTW simply uninstalling the app won't cause change. I contacted both Instacart and DoorDash and asked them to delete my account and all PII and when asked, explained why.

PS: it's worth looking at which investors have supported this kind of attitude.

Pardon any misunderstanding, but how is this different from normal tipping culture in the US?

According to https://www.minimum-wage.org/federal/tipped-employee-minimum..., if a laborer accepting tips does not minimum wage during a time period of their work, their employer must compensate them up to minimum wage.

In other words, tips subside an employers obligation to provide a minimum wage- the same thing Instacart is doing, although instead of a minimum wage, Instacart uses a $10 minimum payment.

In many states, including the one where Instacart started, the minimum wages for tipped and untipped employees are the same. You can't pay someone less than $12/hr and hope that tips make up the difference, even if the the employer is willing to make up any shortcoming.

Silicon Valley Back Pedal Machine

if you were not following this is a response to this open letter:


Instacart reduced payments to workers because they got tips. Basically stealing their tips.

> Instacart has since said it was a glitch — caused by the fact that the customer tipped $10

I was ready to pull out the pitchforks, but then in an effort to keep journalism honest, tried to look to the primary sources for where this was said and can't actually find it. How was this attribution sourced?

The apology misses half of the equation. Instacart was putting a tip section of the app to fool users into thinking that improved the wage of their workers when it kept to stable. So not only were they stealing from their workers they were stealing from their customers. Where's the apology for using the word tip deceptively?

What a non-apology.

This is a situation where the CEO may eventually need to be replaced. The PR stream went negative to an extreme and shoppers have become disillusioned.

In large part because of these revelations, I'm no longer going to tip delivery drivers or feel bad about not doing so.

why not tip cash instead?

Why tip at all? Tipping is an archaic vestige of old-fashioned hierarchical power relationships. I'm not some aristocrat dispensing largesse to the servant class, I'm just a person trying to pay for a service. It's not my job to manage instacart's payroll for them.

@Dang -- Why we selectively add YC Badge to the stories on HN? Hacker News needs to be consistent adding YC startup badges in the brackets for both positive and negative stories. Let's be clear on that.

We add it when the community might not have heard of the startup or known they did YC. Airbnb, Dropbox, Stripe, Reddit, Docker, Twitch, Zenefits, Instacart etc. don't need it (and indeed, consistently don't get it).

To be fair, I've been following YC for 12 years and I didn't recall that Instacart was a YC company until I saw the parent's comment.

There are just too many to keep track of, even for the big guys.

That said, I don't know that who they raised money from is particularly relevant to the story.



Did you create an account expressly to misrepresent labor law? Why?

Well it seems you commented without doing research. I’ll start you out: https://m.youtube.com/watch?reload=9&v=q_vivC7c_1k. Why are you complacent with restaurants taking advantage over employees, but not tech companies?

Sorry for the delay; you've been some kind of banned and I didn't see your reply.

I'm not going to watch a College Humor video at all, much less pretend it's research.

What I will say is that federal law establishes up-front salary limits for tipped waitstaff such that no waitstaff will ever be paid less than $2.15 an hour (a number I feel should be much higher and pinned to a percentage of minimum wage) and in the event waitstaff does not receive sufficient tips to equal minimum wage for time worked, the restaurant is obligated to supplement the difference.

This is known, up front, by both parties.

These drivers were promised a rate of pay and not told in advance that Instacart would be intercepting tips. That's a bad-faith operation.

In addition, the real instance of wage theft here is classification of these employees as minimum-wage-exempt 1099 workers instead of payrolled W2 employees -- and the cynic in me suspects they're classified this way expressly because Instacart knows they're exempted thereby from minimum wage.

So, I agree that reform is needed, but none of the things you posted (modulo some Youtube I'm never going to watch) have been accurate or even relevant.

Which brings me back to my initial questions: did you create an account to misrepresent federal law? Why?

I read about this 10 minutes ago and now the CEO already has a response! Feels really weird. I'm not a conspiracy theorist, but it's almost like the CEO was prepared for the blowback if this thing ever got out. haha

The initial complaint that set off the firestorm was a week ago: https://news.ycombinator.com/item?id=19029801

The articles two days ago by NBC, yesterday by BuzzFeed News, and today by the NYT forced Instacart's hand.

This has been growing for a bit in the news. I've seen it on reddit a bunch the past few weeks from various news sources. I'm sure the NY Times article was the last straw, not the first he heard about it. So probably no conspiracy in that sense.

The drama kicked off weeks ago though?

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