Albertsons is laying off employees and replacing them with gig workers, as app platforms rise

It declined to give an estimate of how many positions would be affected but said workers would be offered the ability to continue to work.

The news about Albertsons’s grocery brands Vons and Pavilions, which was first reported by Los Angeles news site Knock, was greeted with a chorus of outrage from liberals and labor advocates in California, who have long warned that Prop. 22, the ballot proposition that gave gig companies the ability to deny workers protections such as the state-mandated minimum wage and overtime by classifying them as contractors and not employees, would result in job losses and give employers even more incentive to limit the compensation and benefits available to workers.

“This is exactly what we were afraid of when app companies started pushing for a special carve-out from labor laws,” said Caitlin Vega, a labor advocate who works closely with California’s legislature. “If you create a subcategory that has fewer rights and wages, you’re going to shift from traditional employment to this new category of work. And that’s going to worsen the inequality that we already face.”

Albertsons declined to comment on whether its decision was influenced by Prop. 22.

“This decision will allow us to compete in the growing home delivery market more effectively,” the company said in a statement. “Since the COVID-19 outbreak, our eCommerce business has risen to new heights and has become more strategically important to Albertsons Companies.”

Unionized delivery workers will not be laid off in the shift, Albertsons said.

Some of those workers are insulated by a contract that protects them in some ways from encroachment from gig and contract workers.

“In the process of doing organizing and negotiations, the issue of use of third-party apps was a huge issue with our members,” said Jim Araby, an official with a chapter of the United Food and Commercial Workers in Northern California, which helped unionize workers at some Safeway stores in the Bay Area in 2019 (Albertsons owns Safeway).

The delivery workers his union represents make $17 to $22 an hour, have access to employer-paid health insurance, vacation time, sick time and 401(k) benefits, and do not have to use and maintain their own vehicles for their work, he said.

DoorDash, meanwhile, does not count the time workers spend in between deliveries; workers protected by minimum-wage requirements have this time counted, making wage comparison impossible. The company said its workers make an average of $22 an hour nationwide when not counting this downtime. Drivers are also eligible for some health insurance subsidies through the Affordable Care Act when they work 15 hours or more a week, DoorDash spokesman Taylor Bennett said.

Albertsons’s decision had nothing to do with Prop. 22, Bennett said in a statement. He didn’t offer any more details.

“DoorDash has always supported local economies, and as e-commerce and delivery have become even more important for many businesses during these challenging times, we remain committed to helping brick-and-mortar local merchants reach consumers with the best of their neighborhood,” Bennett said.

The move adds fuel to the debate over the future of work that has been unfolding in California — and being watched closely around the country — in recent years.

In 2019, legislators in California passed a bill, AB5, that sought to crack down on worker misclassification — the practice whereby companies classify workers as contractors instead of employees to avoid higher labor costs associated with the category. The bill applied to workers across industries but was written specifically to address misclassification at gig companies such as Uber and Lyft. The companies have long argued their workers are self-employed and thus do not merit extra protections.

Contractors are not entitled to protections such as minimum-wage requirements, overtime rules, workers’ compensation should they get injured on the job, and unemployment insurance, while employees are.

Uber, Lyft and DoorDash helped bankroll a more than $200 million ballot initiative in 2020 to thwart the California bill, formally exempting them from classifying their workers as employees, arguing that their proposal would help empower workers who enjoy being contractors.

The experience of Albertsons workers should serve as a warning for the future of employment across the country if app-based companies continue to find ways around labor laws, labor advocates say.

“It comes as no surprise that these kind of business models are going to be drawn on by more and more companies who are seeking lower labor costs and being released from basic workplace standards and responsibilities,” said David Weil, a former Labor Department official and Brandeis University professor who is an expert on worker-classification issues. “More and more delivery drivers will lose the protections and benefits of employment and be required to work in these independent contractor setups where they’ll be paid less, exposed to greater risks on the job and have no access to basic social protections like unemployment insurance.”

For Democratic legislators in California who had lost their battle against some of Silicon Valley’s powerful players, the news about Albertsons’s layoffs amounted to an “I told you so” moment.

“We warned that this was an effort of corporations to replace good middle-class jobs with jobs with no protections,” said Southern California Assemblywoman Lorena Gonzalez, a Democrat. “And we have exactly that today. We have workers making minimum wage along with health-care benefits and from that to a situation where those jobs are being done by people making sub-minimum wage with no health care and no protections, period. It’s what happens when we allow corporate greed to go unfettered.”

Prop. 22 gave companies confidence that they could contract out work that was previously reserved for employees with secure pay and benefits, without facing the risk of being sued for misclassification, said Chris Benner, a University of California at Santa Cruz professor who has studied app-based delivery work.

“The fact now that they [Albertsons] are moving to this model, except for a small subset of their delivery workers who are unionized in the Bay Area, just underscores the problematic nature of this sort of insecure delivery work,” he said.

Faiz Siddiqui contributed to this report.