A Labor Department audit resulted in Uber having to pay the state of New Jersey $100 million in taxes.
Uber confirmed on Monday that the ride hailing tech company and its subsidiary, Raiser LLC had paid $100 million in taxes to New Jersey following a driver misclassification case. An audit conducted by the New Jersey Department of Labor and Workforce Development revealed that the company blocked thousands of drivers from receiving essential benefits such as unemployment, disability and family leave insurance in the state, by classifying them as contractors and not employees, as New Jersey argued.
CNN reported that by misclassifying drivers as independent contractors, Uber is not only able to skirt laws that require such benefits but that they are also no longer required to pay taxes for unemployment and other funds. On Tuesday, the New Jersey Department of Labor confirmed that Uber paid $78 million in past due taxes and an interest of up to $22 million.
Uber Pledges to Work With Legislators in New Jersey
Uber's $100 million tax payout is the largest of its kind ever received by the state of New Jersey. It covered almost 300,000 drivers in the state, who the Labor Department defended, saying that they are not at fault. New Jersey Labor Commissioner Robert Asaro-Angelo said in a statement on Tuesday that the state's legislators continue to work to make it the "one of the best states for workers."
Asaro-Angelo warned that they would not be swayed by "the whims of corporations' latest business models that are based on eroding long-standing protections." But Uber insists that New Jersey drivers are "independent contractors" who work anytime they please and promised that the ride-hailing tech company would work with local legislators to provide benefits to their drivers without compromising flexibility, Reuters reported.
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Legislators Remain Critical of Gig Companies' Business Models
Uber's $100 million tax payout to New Jersey marks a step forward for drivers who have long been labeled by the company as simply "gig workers," Gizmodo reported. New Jersey Acting Attorney General Matthew Platkin in a statement criticized Uber's business model, which has allowed them to grow exponentially while being exempted from paying for benefits of their "workers."
Platkin said that Uber had not only been denying benefits to their drivers but had been avoiding their "obligation" to contribute to benefit programs for them. He also warned that the state would pursue employee misclassification laws "aggressively" to defend employee rights.
The initial Department of Labor audit initially demanded that Uber pay more than $1 billion worth of back taxes when it first issued a fine for the ride-hailing tech girl back in 2019. The Labor Department sought $522 million from Uber and $528 million from Raiser LLC. But Uber agreed to pay only $12.1 million, while Raiser LLC said it would pay $88 million.
Uber denied that its $100 million tax payout was a "settlement," but the Labor Department is optimistic that employee classification will soon change to support workers' rights.
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