New Jersey is seeking more than US$640 million from Uber Technologies Inc in taxes and penalties, saying the ride-hailing company misclassified its drivers as independent contractors.
The decision is the latest setback for Uber and other companies in the so-called “gig economy” that rely heavily on contract labor to deliver the services at the heart of their popular apps.
Labor advocates say the job classification hurts the workers and the states where they live, which miss out on tax revenue.
The New Jersey Department of Labor and Workforce Development told Uber it, along with its subsidiary Rasier, owes US$523 million in overdue taxes over the past four years, and is also facing fines and interest of US$119 million, according to letters from the department first reported on Thursday by Bloomberg Law.
Uber disputed the state’s findings.
“We are challenging this preliminary, but incorrect determination, because drivers are independent contractors in New Jersey and elsewhere,” the San Francisco-based company said in a statement.
The move was hailed as a victory by those pushing for better working conditions for Uber’s drivers.
Many of Uber’s workers are part-time, but others work long hours and rely on ride-hailing as their sole source of income.
“I have clients who are Uber drivers that are sleeping in their cars because they cannot afford the basic necessities, they can’t afford a place to live,” said Shannon Liss-Riordan, a partner at Lichten & Liss-Riordan, who has represented drivers in the employment classification cases. “That’s not acceptable.”
New Jersey has among the strictest tests for determining whether a worker qualifies as an independent contractor.
To be considered an independent contractor requires meeting all three prongs of a test set up under state law, including that the services performed fall outside the employer’s usual course of business.
Worker classification is important because taxpayers foot the bill for unemployment or disability insurance when independent contractors file for benefits, New Jersey Department of Labor and Workforce Development Commissioner Robert Asaro-Angelo said in a statement.
“This defiance of the law puts honest business owners at an unfair disadvantage,” he said.
The department declined to discuss the case or say whether it is seeking similar restitution from Lyft Inc or other gig economy companies.
San Francisco-based Lyft declined to comment.
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