Uber Fined With $650 Million Employment Tax Bill in New Jersey

Uber fined $650M by New Jersey for misclassifying its drivers as independent contractors

New Jersey, USA — A few months ago, Uber made a bold statement saying that its drivers aren’t employees. Instead, they are independent contractors that aren’t legally obliged to receive employment benefits. Due to this misclassification, New Jersey’s Department of Labor and Workforce Development demanded $649 million for years of unpaid employment taxes and disability insurance for its drivers.

Over the past year, the driver classification issue has attracted the attention of major ride-share corporations and government regulators. In fact, it is such a huge national debate that some states are taking legal action for it. For instance, California passed a law that could require Uber to reclassify its drivers as employees instead of independent contractors. The law is set to go into effect this January 1st.

Meanwhile, it seems that this dilemma inspired New Jersey to issue the multi-million dollar request to Uber. According to Bhairavi Desai, executive director of the New York Taxi Workers Alliance, this is apparently the state’s way of telling corporations (such as Uber) that no one is exempt from and above the law.

“It’s a stinging rebuke of the architects of the gig economy, and we hope it permeates across other sectors,” said Mr. Desai.

Furthermore, the state claims that it has reached out to Uber regarding this concern as far as 2015. However, Uber dispute these findings.

“We are challenging this preliminary but incorrect determination,” an Uber spokesman wrote in an email. “Because drivers are independent contractors in New Jersey and elsewhere.”

Moreover, the company also argued that even if they reclassify their drivers as employees, the $650 million tax fine is too high.

Still, some Uber drivers sued the company in New Jersey. They claimed they are employees, and that the company has not paid adequately or compensated for the costs they incur.

Justin Swidler, a lawyer in Cherry Hill, N.J., who represents Mr. Singh, said many Uber drivers liked the flexibility of the job but did not consider themselves independent contractors.

“A lot of drivers like the freedom in scheduling and that it can be a part-time job,” Mr. Swidler said. “But that’s not the test in New Jersey. You can have those things and be an employee.”

Conversely, if you ask the Uber drivers, “Do you think you’re running an independent business that isn’t dependent on Uber? you’ll universally get a no.”