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Another One Bites the Bullet: Sprig Switches to Employee Model

Who will be next?


The on-demand meal company Sprig has caved to the pressures of the contractor model: It is making all its workers full-fledged employees, including its delivery people.

It’s the latest Silicon Valley startup to make the switch. Grocery delivery company Instacart paved the way in June, followed soon after by mail-sending service Shyp. Luxe and Zirx are considering the move. Meanwhile, ride-hailing services Uber and Lyft are fighting costly lawsuits over the way they classify their drivers.

Since their drivers are contractors instead of employees, Uber and Lyft don’t have to pay their expenses, give them vacation or health benefits or pay into Social Security or taxes for them. If they lose the class-action lawsuits against them, they could be liable for millions more in costs every year.

In the case of Sprig, factoring those expenses in when the company is young sets expectations from potential future investors about the profit margins of the business. Sprig is two years old and has raised $56.7 million from startup investment firms Greylock and Accel, among others, so it’s relatively early in its life cycle.

The company hasn’t decided yet how its workers hourly wages will change in light of being employees, or if they’ll be capped on the number of hours they work. “It will depend on conversations we have with our servers,” Sprig founder Gagan Biyan told Re/code.

Changing its workers to employees also solves the issue of classification before the company could be hit with crippling lawsuits. When cleaning services marketplace Homejoy shut down, its founder said the worker classification lawsuits it was fighting were what ultimately killed the service.

The switch gives Sprig leverage to schedule and manage its workers. Contractors aren’t supposed to receive training or adhere to guidelines around dress code, behavior and shift times — those are all restrictions that would make them more like employees in the eyes of the law, and therefore eligible for benefits.

“One of the reason were moving to employees is to offer more training and development to better communicate our mission,” Biyani said. “We’re starting to take our inspiration from fine dining restaurants, with our servers [delivery people] being able to talk to you at your door about your meal.”

Sprig will also be offering stock option grants to all its employees, including its delivery workers.

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