Why Uber’s $100M payment to unemployment fund could be just start for N.J.

No reason to think state will not perform more audits on companies that may have misclassified workers

The New Jersey Department of Labor & Workforce Development has received a $100 million payment from Uber for the state’s Unemployment Trust Fund, settling a case regarding worker misclassification.

It’s the biggest such payment in a long-simmering dispute over worker classification — and logically begs a question: How much more could be coming?

The answer: Potentially hundreds of millions of dollars more.

Here’s why: Companies benefit by having independent contractors instead of employees, because it limits the amount of payroll taxes they have to pay on each employee — including taxes to help fund disability and unemployment insurance.

Now that the DOL has received payment from Uber for an audit for years 2014-18, there’s nothing to prevent the DOL from auditing Uber again — or anyone else — for such funds.

That includes other so-called “gig economy” companies, such as GrubHub or DoorDash. It also could include other sectors — with construction and hospitality believed to be logical places for audits.

The Department of Labor would not say specifically which companies or sectors it may audit — or currently is auditing. Instead, a department spokesperson said there’s “nothing to preclude” the DOL from making any additional audits.

The DOL would only comment on the specific Uber agreement, saying the $100 million payment came after an audit found the ride-share company improperly classified hundreds of thousands of drivers as independent contractors, depriving them of crucial safety-net benefits such as unemployment, temporary disability and family leave insurance, and failed to make required contributions toward unemployment, temporary disability and workforce development.

The payment follows DOL audits that assessed Uber and its subsidiary Rasier LLC a combined $78 million in past-due contributions plus penalties and interest of $22 million. It is the largest such payment ever received in New Jersey, covering 297,866 drivers.

Labor Commissioner Robert Asaro-Angelo saluted the significance of the payment.

“For over a century, our governors, Legislatures and voters have made New Jersey one of the best states for workers,” he said. “We will not bow to the whims of corporations’ latest business models that are based on eroding longstanding protections.

“Our policies protect and empower workers while strengthening businesses, and the (Gov. Phil) Murphy administration has given us the tools to protect our workforce and keep all employers accountable.”

Acting Attorney General Matt Platkin said the state is ready to do whatever is necessary.

“We will not tolerate companies that misclassify their workers, thereby denying employees vital benefits and dodging their obligation to contribute to programs that benefit the workforce,” he said. “By misclassifying workers, companies both harm their employees and sidestep their obligations under the law. New Jersey will continue to enforce our employee misclassification laws aggressively to prevent such conduct.

“As the economy changes, we will vigorously defend workers’ rights.”

The DOL said New Jersey’s rigorous enforcement of employee classification laws protects workers and law-abiding employers alike, because misclassification extracts a financial toll on both good actor employers and misclassified workers who shoulder additional risk and financial responsibility.

When a worker is misclassified as an independent contractor, they lose the rights that employees are entitled to, including minimum wage, overtime pay, workers’ compensation coverage, unemployment insurance, earned sick leave, family leave or other benefits. They are not protected by workplace safety laws, equal pay protections and a host of other employment-related rights we so often take for granted.

The DOL said employers who misclassify workers as independent contractors skip their contributions to the UI trust fund, leaving every other employer in the state to pay for their delinquency.

Asaro-Angelo said it doesn’t have to be that way. The rules, he said, are clear.

“These companies often repeat the false premise that being an employee stifles flexibility, which is just not true,” he said. “Let’s be clear: There is no reason temporary, or on-demand workers who work flexible hours, or even minutes, at a time can’t be treated like other employees in New Jersey or any other state.”