New Jersey’s Department of Labor and Workforce Development claims that Uber owes the state around $650 million in unemployment and disability insurance taxes because it has been wrongly classifying its drivers as independent contractors. The department recently sent letters to Uber and its subsidiary Rasier, informing the companies that they owe $523 million in past-due taxes over the last four years, as well as $119 million in interest and penalties on the money owed.
“We are challenging this preliminary, but incorrect, determination, because drivers are independent contractors in New Jersey and elsewhere,” said Alix Anfang, an Uber spokeswoman, according to Bloomberg Law.
However, Robert Asaro-Angelo, commissioner for the department, said in a statement that “cracking down on employee misclassification” is a “priority” for Governor Phil Murphy.
“For those who say properly enforcing our unemployment laws will stifle worker flexibility, let’s be clear: There is no reason temporary or on-demand workers can’t be treated like other employees who work flexible hours for short durations,” said Asaro-Angelo.
While the state is only going after unemployment and disability insurance, Uber could eventually be required to pay drivers minimum wage and overtime under state law. As a result, Uber — as well as Lyft — might see costs surge 20 percent if it becomes necessary to reclassify drivers. The companies have already thrown in $30 million each to fight a new California law that will require them to classify drivers as employees, and are preparing to fend off gig worker legislation in New York next year.
“I expect we may see more of this,” said Attorney Shannon Liss-Riordan, who has sued Uber on behalf of California and Massachusetts drivers. “Uber and Lyft, by misclassifying drivers, are harming not only the drivers, but also the states and the public at large. The money that they’re not paying into the unemployment and disability systems is being picked up by the states and the taxpayers.”