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Uber Pays $100 Million for New Jersey Driver Status Claims (1)

Sept. 13, 2022, 1:36 PMUpdated: Sept. 13, 2022, 5:41 PM

Uber Technologies Inc. paid $100 million to New Jersey to resolve allegations of misclassifying its drivers and failing to pay unemployment insurance taxes, the state’s labor department said Tuesday morning.

The payment is the latest big company payout in the wide-ranging legal battle over the employment status of rideshare and delivery drivers. Companies such as Uber, Lyft Inc., Doordash Inc., and Grubhub Inc. routinely classify their drivers as independent contractors.

Workers in this category don’t qualify for the legal protections and workplace benefits available to those who are deemed employees, including minimum wage and overtime laws, unemployment insurance, workers’ compensation, and the federally protected right to form or join a labor union.

Uber’s payment is a fraction of the more than $600 million in unpaid UI taxes plus interest and penalties assessed against San Francisco-based Uber and its New Jersey subsidiary Rasier LLC that Bloomberg Law first reported in 2019. Documents Uber provided on Tuesday indicate the initial assessment was even higher, at more than $1 billion for the two companies combined.

Read More: Uber Hit With $650 Million Employment Tax Bill in New Jersey

Uber and its subsidiary aren’t required to change the way they classify drivers or to begin paying into the state’s UI trust fund going forward.

At the same time, New Jersey officials aren’t precluded from pursuing further UI tax payments from Uber through additional or future audits, said Angela Delli-Santi, a spokeswoman for the state’s labor department.

The labor department and Uber in commenting on the $100 million payment both dug in their heels on oft-repeated arguments for and against classifying rideshare drivers as employees.

“These companies often repeat the false premise that being an employee stifles flexibility, which is just not true,” Labor Commissioner Robert Asaro-Angelo said in a written statement. “Let’s be clear: there is no reason temporary, or on-demand workers who work flexible hours, or even minutes at a time can’t be treated like other employees in New Jersey or any other state.”

Uber spokesman Josh Gold said in an email that Uber drivers are “independent contractors who work when and where they want.”

“We look forward to working with policymakers to deliver benefits while preserving the flexibility drivers want,” he said.

The state is separately pursuing a $16 million assessment against Lyft Inc. for unpaid taxes related to unemployment insurance, temporary disability, and family leave benefits. The labor department announced in March that case was transferred to the state’s administrative law department as Lyft contests the levy.

Other State Efforts

A number of state legislatures including in New York and New Jersey have considered proposals aimed at a compromise—granting some level of workplace benefits to drivers while maintaining their independent contractor status, but disagreement over the details has prevented most states from reaching a deal.

Washington state proved an exception by enacting a rideshare drivers law this year. It drew praise from some state lawmakers as a creative compromise but criticism from national labor officials such as the AFL-CIO and Teamsters leadership, who said drivers should be classified as employees and get the full protections that go with that status.

At the same time, the industry faces pending litigation from state agencies and drivers, such as a lawsuit filed by Massachusetts Attorney General Maura Healey against Lyft and Uber, seeking to force them to reclassify their drivers as employees.

In California, ongoing litigation contests the validity of the state’s legislation that aimed to classify most workers as employees, AB 5, and the subsequent ballot measure Prop 22 that sought to exempt Uber drivers and other gig-industry workers from that law, keeping them as independent contractors.

The US Labor Department also is pursuing a new regulation governing worker classification, but finding differing viewpoints among workers about what policy would best suit their interests.

The New Jersey labor department’s 2019 assessment of $523 million in past-due taxes and up to $119 million in penalties and interest against Uber was a rough estimate based on incomplete information, the department said.

But the $100 million figure is still the largest ever back payment into the state’s UI fund, according to the agency’s announcement, which confirmed reporting first published Monday by The New York Times.

The payment covers unemployment taxes for nearly 300,000 drivers for the years 2014 to 2018 for Uber and its Rasier subsidiary.

(Updated with additional reporting throughout.)

To contact the reporter on this story: Chris Marr in Atlanta at cmarr@bloomberglaw.com

To contact the editors responsible for this story: Martha Mueller Neff at mmuellerneff@bloomberglaw.com; Rebekah Mintzer at rmintzer@bloomberglaw.com