Uber Reportedly Owes NJ $650 Million For Violating Labor Laws

Uber is being hit with a huge bill after several years of dodging New Jersey’s employment taxes and fees for misclassifying drivers as independent contractors, according to a report published by Bloomberg Law Thursday.

The state labor department has been after the ride-sharing giant for unpaid employment taxes for four years, amounting to $523 million in past-due taxes and another $119 million in interest and penalties, the report said.

“We are challenging this preliminary but incorrect determination, because drivers are independent contractors in New Jersey and elsewhere,” an Uber spokesman said in a statement.

At an unrelated press conference Thursday, state Attorney General Gurbir Grewal said his office was advising the labor department concerning their fight with Uber.

“We’re all committed to combatting misclassification,” he said. Labor department officials did not immediately respond to request for comment.

The Garden State is the latest to jump into the fight against ride-share companies including Uber and Lyft. California’s recently passed a “gig worker” law that will require companies including Uber or Lyft to classify drivers as employees instead of independent contractors. New York drivers recently filed suit against Uber, alleging they are owed millions in unpaid wages.

The squabble between New Jersey and the San Francisco-based company dates back to 2015, when a court judgement was issued ordering the company to pay about $54 million in overdue unemployment and temporary disability insurance contributions, Bloomberg Law reported. It’s unclear if that was ever paid, and state officials did not immediately comment.

A bill (S4204) that could protect workers “from being exploited through their misclassification as independent contractors” was approved by the Senate Labor Committee Thursday.

“This is a pro-worker bill for the new gig economy,” said Sen. Stephen Sweeney, who sponsored the bill. “It will codify into law existing regulations and close a loophole that has allowed for the misclassification and exploitation of some employees. It’s all about protecting the rights of workers.”

Workers classifications are determined by an “ABC test,” which begins with the presumption that the worker is an employee and calls on the employer to prove they are independent contractors.

Sweeney’s bill would strengthen aspects of the test so workers are not deemed exempt from employee status because they work outside of the business for where the service is performed, and require the work performed to meet a standard of customarily engaging in an independently established trade or business.

New Jersey has lost tens of millions of dollars every year since 2000 in foregone state income taxes, unemployment and disability contributions, according to a task force that issued a July report assessing the misclassification of workers in the state.

In 2018, the Department of Labor determined that 12,315 workers were misclassified, more than $462 million in wages went underreported, and nearly $14 million in contributions — such as unemployment, disability and family leave insurance — were underreported, the report states. That was an audit of 1% of New Jersey employers, so the true costs are likely much greater.

“Misclassification not only hurts workers, it hurts law-abiding businesses and the state,” Sweeney said. “The businesses that don’t play by the rules aren’t paying into the unemployment fund or the disability fund, which raises costs for workers and all other businesses. It shortchanges everyone else.”

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