A major grocery store called its workers 'first responders' early in the pandemic. Now, it's making the 'strategic decision' to ditch in-house delivery in favor of contractors.

  • Albertsons made a "strategic decision" to abandon its in-house delivery fleet, and will start the transition on February 27, a spokesperson told Business Insider on Monday, which was first reported by local news outlet KNOCK.

  • Last year, Albertsons called its workers "first responders" and pushed to get them priority access to COVID-19 tests and PPE, but has since faced backlash from employees by ending pandemic pay raises and seeking to raise their healthcare costs.

  • The change is happening in the wake of California voters passing Prop 22, which DoorDash and other gig companies claimed would preserve jobs.

  • Are you being laid off by Albertsons or another grocery store? Contact this reporter at 503-319-3213 or tsonnemaker@insider.com.

  • Visit Business Insider's homepage for more stories.

Albertsons and some of its subsidiaries, including Vons and Pavilions, are discontinuing their in-house delivery services in parts of California and other states starting in February. The grocery chains will instead rely more heavily on third-party delivery apps, including DoorDash, to handle grocery deliveries, local news outlet KNOCK reported Monday.

"In early December, Albertsons Companies made the strategic decision to discontinue using our own home delivery fleet of trucks in select locations, including Southern California, beginning February 27, 2021," Albertsons spokesperson Andrew Whelan told Business Insider.

"We will transition that portion of our eCommerce operations to third-party logistics providers who specialize in that service. Our HR teams are working to place impacted associates in stores, plants, and distribution centers," Whelan said.

Albertsons didn't respond to questions about employees losing their jobs. In Texas, the company told the Dallas Morning News that it will also fire nearly 100 employees at Tom Thumb locations.

The move comes weeks after a new California law went into effect that eliminated labor protections for app-based food delivery workers and rideshare drivers, which was authored and bankrolled by gig companies.

As DoorDash, Uber, Lyft, Instacart, and Postmates waged a $200 million battle last year to pass the bill, known as Proposition 22, they pointed to "independent" research claiming it would save as many as 900,000 jobs across the state (it turned out the companies had paid a combined $411,599 to the researchers behind the study).

Albertsons' plans to cut in-house delivery and route new business to delivery companies like DoorDash, however, shows how Prop 22's passage potentially pushes adjacent industries to consider cheaper labor options.

"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 neighborhoods," DoorDash spokesperson Taylor Bennett told Business Insider.

Read more: California voters approved Proposition 22, keeping ride-share and food delivery drivers as contractors - here's what that means for companies like Uber, Lyft, Instacart, DoorDash and their workers

'First responders'

Last April, as grocery store workers faced increasingly dangerous working conditions due to the coronavirus pandemic and companies faced pressure to take better care of their workers, Albertsons and United Food and Commercial Workers (the union that represents many of its employees) joined forces to push for grocery employees to temporarily be classified as "extended first responders" in order to get priority access to COVID-19 tests and protective gear.

"Not only must we work together to protect first responders and healthcare professionals, but we must also protect the associates who work at our supermarkets because their service to our communities is absolutely essential during this time," Albertsons CEO Vivek Sankaran and UFCW international president Marc Perrone said in an advertisement for the initiative.

But several months later, Albertsons' approach shifted. The company ended its $2 per hour "appreciation pay" in June, and drivers threatened to go on strike in October after Albertsons proposed increasing healthcare costs by adding a monthly fee for coverage, forcing the company back to the negotiating table, according to the Orange County Register.

"The workers' request is simple: that the grocers continue to provide affordable family health care, which the employers can clearly afford," the Teamsters union, which represents the drivers, said in a press release at the time, citing "record profits and huge executive compensation."

Cutting costs, workers

Albertsons reported that it earned $38.5 billion in revenue between the end of February and mid-September, a 17% spike from the same period in 2019, while profit climbed by 153%, from $343.8 million to $870.7 million.

Sankaran, who became CEO in April 2019, received a $10 million signing bonus and more than $4.1 million in salary and bonuses during the company's 2019 fiscal year (excluding the approximately $33.6 million he currently owns in Albertsons stock).

Albertsons, which also reported that its costs ballooned and its quarterly profit dropped by around 3.5% last quarter, plans to outsource delivery to companies like DoorDash.

That's where Prop 22 enters the picture.

Albertsons is required to pay its delivery employees a minimum wage, provide them with healthcare coverage, and adhere to California's workplace safety regulations and other labor laws. Employees who have decided to unionize also have more ability to negotiate better pay, benefits, and conditions - or go on strike, as they threatened to do in October.

Delivery drivers for DoorDash and other app-based companies cost those companies less per worker, however, because independent contractors aren't protected by the same laws around pay, benefit, and working conditions as those directly employed by a company like Albertsons.

Prop 22 cemented that disparity into law by exempting California food delivery and rideshare drivers from the state's existing labor protections, allowing app companies to pay them for only a fraction of the hours they work and costs they incur and preventing them from unionizing to push for better wages and benefits.

Do you work for Albertsons, DoorDash, or other grocery stores or food delivery companies and have insights to share? We'd love to how your company is navigating the new changes brought on by Proposition 22. Contact this reporter using a non-work device via encrypted messaging app Signal ( +1 503-319-3213 ), email (tsonnemaker@insider.com), or Twitter (@TylerSonnemaker ). We can keep sources anonymous. PR pitches by email only, please.

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