Uber to pay $650 million employment tax bill to New Jersey

Uber considers its drivers as contractors and not as employees because it does not pay the drivers. Instead, they receive 20% from each trip. New Jersey Department of Labor and Workforce Development, however, is not convinced with that argument.

The department has levied Uber and its Rasier subsidiary with a $650 million bill for overdue unemployment and disability insurance taxes from the past four years, arguing that Uber misclassified drivers. 

Back in 2015, the state taxed Uber $54 million, but it is not confirmed whether Uber ever paid that amount. Breakdown the new tax bill, and you get to know; about $523 million of that is actual taxes, while up to $119 million is due in interest and penalties due to a four years delay in payment. 

Labor Commissioner Robert Asaro-Angelo said that the state was “cracking down on employee misclassification” and that there was “no reason” that on-demand workers couldn’t be treated like other flexible staff.

Uber is not giving up and is firmly standing by its perspective. It said it is “challenging this preliminary but incorrect determination,” and kept its opinion that drivers are “independent contractors.” The company considers that the authorities have incorrectly valued their business in the state. Uber has stated that it does not treat drivers as employees because it limits their work flexibility. Still, it’s believed that Uber uses the argument to bypass minimum wage and other labor guarantees.

New Jersey is not alone in its concern towards these gig-based companies. California State Senate has recently approved a bill to take into account companies like Uber and Lyft, to recognize their independent contractors as employees. 

Companies would have to reclassify their contractors as employees, and therefore will be obliged to give social security and safety net to its employees. The latest move had a huge influence on other states’ legislature and, as a former Labor Department official David Weil told the NYT, “will have major reverberations around the country.”

The state has a mechanism to determine whether or not the said people are employees or contractors, and that refusal to pay taxes is a violation of the law, and Uber will be dealt with accordingly.

Featured image: Getty

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