Uber and its subsidiary pay New Jersey $100 million in back taxes over driver classification dispute

By Catherine Thorbecke, CNN Business

Uber and one of its subsidiaries paid $100 million to New Jersey after an audit by the state’s Department of Labor and Workforce Development determined the ride-share company improperly classified hundreds of thousands of drivers as independent contractors.

Workers classified as independent contractors don’t receive benefits such as unemployment, temporary disability and family leave insurance. Using that classification also means that companies don’t pay taxes toward unemployment and other funds.

The New Jersey Department of Labor on Tuesday announced that Uber and its subsidiary, Raiser LLC, had paid $78 million in past-due taxes plus interest of $22 million. The payment was the largest of its kind ever received in New Jersey, and covered nearly 300,000 drivers. The agency emphasized that misclassified workers are not at fault and can find more information about their rights at a designated website.

“For over a century, our governors, legislatures and voters have made New Jersey one of the best states for workers. We will not bow to the whims of corporations’ latest business models that are based on eroding long-standing protections,” New Jersey Labor Commissioner Robert Asaro-Angelo said in a statement Tuesday announcing the payment.

Uber emphasized that despite the payment, it still views drivers as independent contractors and hopes to work with policymakers regarding this classification.

“Drivers in New Jersey and nationally are independent contractors who work when and where they want -— an overwhelming amount do this kind of work because they value flexibility,” Josh Gold, an Uber spokesperson, told CNN Business in a statement Tuesday. “We look forward to working with policymakers to deliver benefits while preserving the flexibility drivers want.”

Uber and other gig companies have been able to massively scale up their businesses by treating workers as independent contractors and not paying for benefits that they would be entitled to as employees.

The $100 million payment reflects just a fraction of what the state’s audit initially requested, after the state’s Department of Labor examined the companies’ books over a five-year period from 2014 to 2018. The state labor agency said the revised figure of $100 million is based on additional data provided by Uber and Raiser following the initial audit.

Asaro-Angelo slammed the idea that independent contractor classification of drivers was about flexibility for workers.

“These companies often repeat the false premise that being an employee stifles flexibility, which is just not true,” Asaro-Angelo added in his 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’s classification of drivers has been embroiled in controversy across the nation, from New Jersey to California, for years now as gig economy giants have aggressively fought in court and beyond to classify workers as independent contractors.

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