If you run a business and think you have it hard, when you consider what Uber is going through this Christmas season you might not feel so bad—unless you too rely on independent contractors to get work done. In that case, you could end up facing the same whirlwind soon enough.
The most recent example of the war on independent contractors is the state of New Jersey hitting Uber with an assessment for $650 million in back-due unemployment and disability insurance contributions and interest, holding that its drivers were really employees, not contractors. You read that number right: $650,000,000.
New Jersey Labor Commissioner Robert Asaro-Angelo said the state “is cracking down on employee misclassification because it stifles our workforce and inflicts a huge financial toll on our economy.”
The ride share service is expected to fight the assessment in the court system, although at this point its prospects of succeeding don’t look good. “We are challenging this preliminary but incorrect determination, because drivers are independent contractors in New Jersey and elsewhere,” declared Uber spokeswoman Alix Anfang.
But no matter what it does, the company is unlikely to prevail, according to attorney Mark E. Tabakman of the law firm of Fox Rothschild LLP.
He says Uber probably will seek an informal meeting with state Department of Labor (NJDOL) officials, including someone titled the Redetermination Auditor, to see if it can cut a deal. “The reality is that the DOL will never agree that all (or any) of these individuals are independent contractors and Uber will likely never concede that any of them are employees because that would have nationwide consequences.”
Even if the NJDOL agrees to cut the assessments down to nominal, nuisance value amounts, Uber would be compelled to treat all of its New Jersey drivers as statutory employees going forward, something that Tabakman asserts the company will never do voluntarily.
He says a further cruel irony awaits Uber, or any putative employer pursuing the same course of action. If the company cannot cut an acceptable deal with the Redetermination Auditor, the case will proceed to trial in the Office of Administrative Law (OAL), before a neutral Administrative Law Judge (ALJ), who is not an NJDOL employee.
“Even if the company completely prevails before the ALJ, the Commissioner of Labor, the head of the agency that the company has just beaten, then has 45 days to sustain, modify or reverse the ALJ decision,” Tabakman points out. “Any bets as to which option the commissioner would choose?”
Uber then could choose to pursue the case through the New Jersey court system, starting with the Appellate Division. However, as Tabakman notes, those courts greatly defer to the position and decision of a state agency. “Thus, it is very dangerous to take a case to OAL because even if you win, you may well, in the end, lose.”
Even in the absence of the NJDOL assessment, it looks like the future holds no joy for Uber, or anyone else who uses independent contractors in New Jersey, because it seems almost certain the state legislature and governor will enact legislation next year mirroring a new California law, which makes it virtually impossible for any worker to be classified as a contractor in that state as of Jan. 1.
In California, Uber along with Lyft and DoorDash have mounted a campaign to have a referendum placed on next November’s ballot that, if the voters approve, would exclude their drivers from the new law.
For years, Uber also has been fighting attempts by states and some municipalities to upend its independent contractor business model. But with New Jersey and other states getting ready to adopt their own versions of California’s law, that could end up being nothing more than a forlorn hope.
“The end result, potentially, is that Uber has to change its business model or create some indicia of true employment,” Tabakman suggests. Others have estimated that ending drivers’ contractor status would be increase Uber and Lyft’s labor costs by 20-30%.
