What does the Shipt settlement say about the future of worker classification?

The line between employee and contractor just got blurrier. 

Delivery platform Shipt, owned by Target, has agreed to pay $800,000 to settle worker misclassification claims in Minnesota, but will still classify its “Shoppers” as independent contractors. 

At first glance, that might sound like a win for the gig model. But for anyone in HR, payroll, or the PEO space, it’s a sign that states are taking a closer look at worker classification practices, even when they don’t force a company to change its structure. 

A quick recap 

Minnesota’s Attorney General Keith Ellison sued Shipt in 2022, alleging that the company denied basic employee protections, including minimum wage, paid sick leave, unemployment insurance, and workers’ compensation coverage, by classifying workers as independent contractors. 

As part of the September 2025 settlement, Shipt will: 

• Provide a written appeal process for workers who are deactivated from the app. 

• Maintain occupational accident insurance at no cost to its contractors. 

• Offer weekly pay transparency and ensure workers keep all their tips. 

No reclassification was required, so Shipt’s business model stays the same. But the takeaway is clear: calling someone a contractor doesn’t protect a company if the work looks and functions like regular employment. 

A compliance checkpoint for PEO leaders 

1. The compliance landscape is shifting  

Every settlement like this adds weight to the growing list of state-level actions against worker misclassification. It’s no longer just about California or New York; regulators everywhere are paying attention.  

2. Workers’ comp exposure is real  

Misclassification can directly impact workers’ compensation obligations. When a company labels employees as contractors, it removes them from comp coverage, and that’s exactly where most state regulators are stepping in.  

3. Your clients will ask questions  

Employers who rely on gigs or part-time workers are watching these headlines closely. This is an opportunity for PEOs to educate clients about correct classification practices and ensure payroll, HR, and insurance documentation line up.  

The takeaways 

The Shipt settlement might not have changed how the company classifies its workers, but it’s a reminder that every day business can still come with a compliance bill attached. 

For the PEO industry, this reinforces the need to: 

• Stay ahead of state-level definitions of employment. 

• Audit client relationships where 1099 classifications are common. 

• Communicate proactively about risk and documentation. 

Worker classification is no longer just a legal box to tick; it’s becoming a core compliance strategy. As gig models reshape their work, the PEOs who guide clients with clarity and foresight will define the next chapter of compliance leadership.