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Uber Hit With $650 Million Employment Tax Bill In New Jersey - Authorities Allege Ride-Sharing Company Has Been ‘Misclassifying’ Drivers As ‘Independent Contractors’

Published Friday, November 15, 2019
by Bloomberg Law
Uber Hit With $650 Million Employment Tax Bill In New Jersey - Authorities Allege Ride-Sharing Company Has Been ‘Misclassifying’ Drivers As ‘Independent Contractors’

(THE STATE OF NEW JERSEY) - Uber Technologies Incorporated owes New Jersey about $650 million in Unemployment and Disability Insurance Taxes because the ride-share company has been misclassifying Drivers as Independent Contractors, the state’s Labor Department said.

Uber and subsidiary Rasier LLC were assessed $523 million in past due taxes over the last four years, the state Department of Labor and Workforce Development said in a pair of letters to the companies.

The ride-share businesses also are on the hook for as much as $119 million in interest and penalties on the unpaid amounts, according to other internal department documents.

“We are challenging this preliminary but incorrect determination, because Drivers are Independent Contractors in New Jersey and elsewhere,” Uber spokeswoman Alix Anfang told Bloomberg Law.

The New Jersey Labor Department has been after Uber for unpaid Employment Taxes for at least four years, according to the documents, which Bloomberg Law obtained through an Open Public Records request.

Uber extended declines on news of New Jersey’s efforts, falling as much as 3.9%.

Ride-hailing competitor Lyft Incorporated also dropped.

The state’s determination is limited to Unemployment and Disability Insurance, but it could also mean Uber is required to pay Drivers minimum wages and overtime under State Law.

Uber’s costs per Driver, and those of Lyft, could jump by more than 20% if they are forced to reclassify Workers as Employees, according to Bloomberg Intelligence.

The notices mark the latest attack on the ride-share companies’ business model, which treats Drivers as self-employed entrepreneurs rather than Employees - a classification that deprives the Workers of certain benefits.

Uber and Lyft recently pledged $30 million each to fight a new California Law that is expected to force them to reclassify Drivers as Employees.

They’re also prepping for a similar lobbying battle in New York State, where Lawmakers are planning to take up Gig Worker Legislation next year.

“I expect we may see more of this,” Shannon Liss-Riordan, an attorney who has sued Uber on behalf of Drivers in California and Massachusetts, said of New Jersey’s tax claim against Uber. “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.”

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