[US] Uber’s $100m payroll tax deal is warning for gig economy employers

Observers have described Uber‘s recent $100 million payment in overdue payroll taxes to New Jersey as a concession that its classification of ride-hailing drivers as independent contractors is vulnerable under the state’s laws, New Jersey Law Journal reports.

Uber and a subsidiary, Rasier LLC, paid $78 million in past-due taxes and $22 million in penalties and interest to the Department of Labor and Workforce Development’s Unemployment Trust Fund. The payment, reported first by the New York Times, was accompanied by declarations from both sides.

In a statement, New Jersey Labor Commissioner Robert Asaro-Angelo said that the state “will not bow to the whims of corporations’ latest business models that are based on eroding long-standing protections.”

A spokeswoman for Uber, in a statement, said the payment should not be called a settlement, and that the company still considers its drivers independent contractors.

Point made

These back-and-forth statements could confuse observers who have been following Uber’s ongoing arguments with New Jersey.

The payment represents a big change from the $650 million New Jersey said the companies owed to it in unpaid employment taxes. New Jersey has long maintained that Uber misclassified thousands of employees as independent contractors.

Uber’s payment of the overdue taxes to New Jersey represents a “landmark settlement,” Michael LeRoy - a lecturer at the School of Labor & Employment Relations and the College of Law at the University of Illinois - said.

Mr LeRoy closely follows the gig economy, he described New Jersey’s interactions with Uber as “a confusing, muddled picture,” but added that “it’s a class case of ‘half a loaf is better than nothing at all’ from New Jersey’s perspective.”

“And practically speaking, they weren’t expecting to get a court ruling that would say in the context of unemployment insurance that Uber has misclassified its employees,” he said. “I haven’t seen that kind of Uber case.”

Mr LeRoy said the recent announcement was “a classic settlement in terms of money being paid without admitting liability or conceding any kind of legal argument, and the agency has filled its coffers and made its point.”

“New Jersey has accomplished something important for its unemployment insurance fund. It also has sent a message to a large number of other gig employers. I believe New Jersey has essentially said everybody is on notice here, and I imagine that New Jersey will follow up by pursuing other actions. And this will be a background factor that Lyft and DoorDash and some of the others will be paying attention to,” Mr LeRoy said.

“The main reason they’re conceding is under New Jersey’s definition of an employee, they have a losing case. New Jersey has one of the most expansive definitions of an employee and one of the narrowest definitions of an independent contractor.”

Payroll Taxes Versus Wage-and-Hour Violations

Two class action suits against Uber on behalf of New Jersey drivers - Singh v. Uber Technologies and Calabrese v. Uber Technologies - were reportedly dismissed and sent to arbitration in November 2021 in U.S. District Court. Appeals in those cases are pending before the U.S. Court of Appeals for the Third Circuit.

Uber’s payment is the largest of its kind in New Jersey and covers 297,866 drivers, according to a statement from the Department of Labor and Workforce Development.

New Jersey’s audit of Uber for 2014 to 2018 originally assessed a combined $523 million in past-due contributions plus penalties of up to $119 million, but those figures were based on incomplete data, as allowed by law, the Department of Labor and Workforce Development said.

Uber and Rasier reportedly contested the findings and the case was sent to New Jersey’s Office of Administrative Law. 

The revised assessment of $100 million is based on additional data provided by Uber and Rasier, state officials said.

“This historical case should serve as a reminder to employers and workers that New Jersey law applies to anyone doing business and working in New Jersey,” the Department of Labor and Workforce Development statement said.

“New Jersey has established itself as a national leader in fighting worker misclassification, as we’ve demonstrated through our gold-standard ABC Test. This simple, three-pronged standard, which determines whether a worker should be classified as an employee or an independent contractor, has been affirmed by multiple court rulings, including by the New Jersey Supreme Court just weeks ago,” Mr Asaro-Angelo said.

Actions by government entities such as the one New Jersey brought to collect unpaid payroll taxes from Uber have taken on greater importance because suits by individual litigants against the company have largely landed in private arbitration, said Shannon Liss-Riordan of Lichten & Liss-Riordan in Boston who was represented plaintiffs in many of those suits.

Ms Liss-Riordan reportedly sees New Jersey’s settlement as a pragmatic move because it helps replenish the state’s coffers.

While New Jersey sought repayment of payroll taxes from Uber, California and Massachusetts have sued the company for wage-and-hour violations, Ms Liss-Riordan said.

Courts have “allowed Uber to get away by upholding arbitration clauses. That puts a lot of responsibility in the hands of government actors, and New Jersey is one of the state governments that has aggressively gone after Uber,” Ms Liss-Riordan said. “We can spend forever fighting these companies. It’s understandable along the way that some entities will take a large settlement like this to get some payment.”

Source: New Jersey Law Journal

(Quotes via original reporting)

Observers have described Uber‘s recent $100 million payment in overdue payroll taxes to New Jersey as a concession that its classification of ride-hailing drivers as independent contractors is vulnerable under the state’s laws, New Jersey Law Journal reports.

Uber and a subsidiary, Rasier LLC, paid $78 million in past-due taxes and $22 million in penalties and interest to the Department of Labor and Workforce Development’s Unemployment Trust Fund. The payment, reported first by the New York Times, was accompanied by declarations from both sides.

In a statement, New Jersey Labor Commissioner Robert Asaro-Angelo said that the state “will not bow to the whims of corporations’ latest business models that are based on eroding long-standing protections.”

A spokeswoman for Uber, in a statement, said the payment should not be called a settlement, and that the company still considers its drivers independent contractors.

Point made

These back-and-forth statements could confuse observers who have been following Uber’s ongoing arguments with New Jersey.

The payment represents a big change from the $650 million New Jersey said the companies owed to it in unpaid employment taxes. New Jersey has long maintained that Uber misclassified thousands of employees as independent contractors.

Uber’s payment of the overdue taxes to New Jersey represents a “landmark settlement,” Michael LeRoy - a lecturer at the School of Labor & Employment Relations and the College of Law at the University of Illinois - said.

Mr LeRoy closely follows the gig economy, he described New Jersey’s interactions with Uber as “a confusing, muddled picture,” but added that “it’s a class case of ‘half a loaf is better than nothing at all’ from New Jersey’s perspective.”

“And practically speaking, they weren’t expecting to get a court ruling that would say in the context of unemployment insurance that Uber has misclassified its employees,” he said. “I haven’t seen that kind of Uber case.”

Mr LeRoy said the recent announcement was “a classic settlement in terms of money being paid without admitting liability or conceding any kind of legal argument, and the agency has filled its coffers and made its point.”

“New Jersey has accomplished something important for its unemployment insurance fund. It also has sent a message to a large number of other gig employers. I believe New Jersey has essentially said everybody is on notice here, and I imagine that New Jersey will follow up by pursuing other actions. And this will be a background factor that Lyft and DoorDash and some of the others will be paying attention to,” Mr LeRoy said.

“The main reason they’re conceding is under New Jersey’s definition of an employee, they have a losing case. New Jersey has one of the most expansive definitions of an employee and one of the narrowest definitions of an independent contractor.”

Payroll Taxes Versus Wage-and-Hour Violations

Two class action suits against Uber on behalf of New Jersey drivers - Singh v. Uber Technologies and Calabrese v. Uber Technologies - were reportedly dismissed and sent to arbitration in November 2021 in U.S. District Court. Appeals in those cases are pending before the U.S. Court of Appeals for the Third Circuit.

Uber’s payment is the largest of its kind in New Jersey and covers 297,866 drivers, according to a statement from the Department of Labor and Workforce Development.

New Jersey’s audit of Uber for 2014 to 2018 originally assessed a combined $523 million in past-due contributions plus penalties of up to $119 million, but those figures were based on incomplete data, as allowed by law, the Department of Labor and Workforce Development said.

Uber and Rasier reportedly contested the findings and the case was sent to New Jersey’s Office of Administrative Law. 

The revised assessment of $100 million is based on additional data provided by Uber and Rasier, state officials said.

“This historical case should serve as a reminder to employers and workers that New Jersey law applies to anyone doing business and working in New Jersey,” the Department of Labor and Workforce Development statement said.

“New Jersey has established itself as a national leader in fighting worker misclassification, as we’ve demonstrated through our gold-standard ABC Test. This simple, three-pronged standard, which determines whether a worker should be classified as an employee or an independent contractor, has been affirmed by multiple court rulings, including by the New Jersey Supreme Court just weeks ago,” Mr Asaro-Angelo said.

Actions by government entities such as the one New Jersey brought to collect unpaid payroll taxes from Uber have taken on greater importance because suits by individual litigants against the company have largely landed in private arbitration, said Shannon Liss-Riordan of Lichten & Liss-Riordan in Boston who was represented plaintiffs in many of those suits.

Ms Liss-Riordan reportedly sees New Jersey’s settlement as a pragmatic move because it helps replenish the state’s coffers.

While New Jersey sought repayment of payroll taxes from Uber, California and Massachusetts have sued the company for wage-and-hour violations, Ms Liss-Riordan said.

Courts have “allowed Uber to get away by upholding arbitration clauses. That puts a lot of responsibility in the hands of government actors, and New Jersey is one of the state governments that has aggressively gone after Uber,” Ms Liss-Riordan said. “We can spend forever fighting these companies. It’s understandable along the way that some entities will take a large settlement like this to get some payment.”

Source: New Jersey Law Journal

(Quotes via original reporting)