Lyft Pays New Jersey $19.4 Million Over Misclassifying 100,000 Drivers

Transportation company Lyft has paid the state of New Jersey $19.4 million to settle a case involving misclassification of more than 100,000 drivers as independent contractors.

According to the New Jersey Department of Labor and Workforce Development (NJDOL), an audit was triggered when Lyft drivers filed for unemployment insurance and disability benefits, revealing that Lyft had not made required contributions to the state’s unemployment, temporary disability, family leave insurance trust funds, and workforce development funds from 2014 to 2017.

When workers are misclassified as independent contractors, they lose certain rights as employees, including minimum wage, overtime pay, workers’ compensation coverage, unemployment insurance, earned sick leave, family leave, and other benefits. Also independent contractors are not protected by workplace safety laws, equal pay protections, and other employment-related rights.

Employers that misclassify workers avoid making mandatory contributions to the state’s unemployment insurance fund, leaving other employers to pay for their delinquency.

After the audit, Lyft was assessed more than $10.8 million in past due contributions, plus penalties and interest of more than $8.5 million. In 2022, Lyft contested NJDOL’s findings, and the case was sent to state’s Office of Administrative Law (OAL) for a hearing. Lyft initially paid the more than $10.8 million assessed for contributions to stop the running of interest, while continuing to contest the NJDOL’s assessment. Last month, just days before the first hearing date at the OAL, Lyft withdrew its request for a hearing and paid the remaining balance owed of more than $8.5 million for penalties and interest, bringing the total to $19.4 million.

In 2022, Lyft’s competitor in the ride-hailing business, Uber, paid New Jersey $100 million for misclassifying drivers as independent contractors. The ride-hailing company made a payment of $12.1 million, while its subsidiary Raiser paid about $88 million.

New Jersey compensation law presumes a worker is an employee. New Jersey courts including the state Supreme Court have used the “ABC test” to determine if someone can be considered an independent contractor. According to this test, a worker should be considered an employee unless all the following circumstances apply:

1. The individual has been and will continue to be free from control or direction over the performance of work performed, both under contract of service and in fact; and
2. The work is either outside the usual course of the business for which such service is performed, or the work is performed outside of all the places of business of the enterprise for which such service is performed; and
3. The individual is customarily engaged in an independently established trade, occupation, profession or business.

Over the summer, NJDOL proposed rules it said would strengthen protections for independent contractors by adding the ABC test to the state’s administrative code, thereby giving it more legal force. The transportation industry and many drivers have opposed the change.

“Misclassification imposes a financial toll on both good actor employers and misclassified workers, who lose critical rights such as minimum wage, overtime pay, workers’ compensation coverage, unemployment insurance, earned sick leave, family leave, and more,” said Labor Commissioner Robert Asaro-Angelo in announcing the Lyft settlement. “Although many allege that being an employee stifles flexibility, this couldn’t be further from the truth. 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.”

Topics
Personal Auto
New Jersey
Sharing Economy