Uber May Owe $640M for Misclassifying N.J. Workers


Allen Smith, J.D. By Allen Smith, J.D. November 18, 2019
Uber May Owe $640M for Misclassifying N.J. Workers

​New Jersey's labor department is seeking more than $640 million from Uber for allegedly misclassifying drivers as independent contractors, according to The Associated Press (AP). The department informed Uber that it owes $523 million in overdue taxes from the last four years and fines and interest of $119 million, Bloomberg Law reported.

In a statement, Uber said, "We are challenging this preliminary but incorrect determination because drivers are independent contractors in New Jersey and elsewhere."

We've rounded up articles and resources from SHRM Online and other trusted media outlets on the misclassification of workers as independent contractors.

Investors Worry About Reclassification as Employees

The threat of having to reclassify independent contractors as employees is a big worry among investors in companies like Uber and Lyft, according to Daniel Ives, managing director, equity research at Wedbush Securities in the New York City area. "It adds the black clouds over Uber, Lyft and the overall gig economy, as their business models were built on contractors," he said.


New York City Expands Protections for Contractors

As of Jan. 1, 2020, the New York City Human Rights Law will cover independent contractors. The law prohibits discrimination based on age, race, color, national origin, gender, partnership status, sexual orientation and disability. Under the law, companies may not automatically bar someone from employment just because of prior convictions. Employers instead must go through an eight-step analysis to assess the risk that a person with a criminal history might pose, including the time that has passed since the conviction and the duties of the job.


California Has Approved Strict Independent-Contractor Test

In September, California Gov. Gavin Newsom signed into law legislation that will make it difficult to classify workers as independent contractors. Gig-economy businesses, such as Uber and Lyft, opposed the bill. After state legislators approved the bill, Uber said it still plans to classify drivers as independent contractors.

(SHRM Online)

Pros and Cons of Working with Independent Contractors

There are advantages and disadvantages to independent-contractor work. Gig workers may more easily break out of a strict 9-to-5 schedule and have more control over their schedule. Gig work also can enable employers to contract with individuals for limited projects without long-term obligations. But in addition to the legal risk of misclassifying employees as independent contractors, employers may find it more difficult to make contractors feel engaged in their work.  

(SHRM Online)

[SHRM members-only toolkit: Employing Independent Contractors]

Misclassifying Workers Doesn't Violate NLRA

The National Labor Relations Board decided in August that an employer's misclassification of its employees as independent contractors does not violate the National Labor Relations Act. Independent-contractor determinations are difficult and complicated, the board noted. However, board member Lauren McFerran dissented, saying the decision would have a "chilling effect" on labor-law rights.

(SHRM Online)


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