By Nikita Biryukov
Reprinted with permission
New Jersey Monitor
Lyft paid the state of New Jersey $19.4 million to resolve allegations that the company misclassified its drivers as independent contractors, state Department of Labor Commissioner Robert Asaro-Angelo announced Thursday.
The payment includes $10.8 million for unemployment, family leave, and disability taxes that labor authorities said the firm had failed to pay between 2014 and 2017, plus $8.5 million in penalties and interest.
An independent contractor designation makes workers ineligible for family leave, unemployment, and disability benefits and exempts their employers from the payroll taxes that fund those benefits.
“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,” Asaro-Angelo said in a statement.
The Lyft payment comes as labor officials are considering new rules that would upend how ride-hail services classify their drivers.
Companies like Uber, which in 2022 paid New Jersey $100 million to resolve more than $600 million in misclassification claims between 2014 and 2018, and Lyft have long maintained their role is limited to connecting drivers with passengers and that their workers are independent contractors.
A Lyft spokesperson in a statement said the firm still held that view.
“While we disagree with the NJDOL’s findings, we will not be pursuing further challenges to the assessment,” said CJ Macklin, the spokesperson.
State labor officials sought payment of past due contributions following an audit of Lyft prompted by some of its drivers seeking unemployment and disability benefits, the agency said.
The firm contested the determination in 2022, but withdrew its challenge in August, days ahead of a hearing before an administrative law judge, state officials said Thursday. It had earlier paid $10.8 million, which was assessed in unpaid contributions to prevent the balance from accruing interest, they said.
“We will not allow businesses to exploit workers by misclassifying them, stripping employees of essential benefits and avoiding their responsibility to support programs that protect our workforce,” Attorney General Matt Platkin, whose office represented the Department of Labor, said in a statement.
Lyft did not immediately return a request for comment.
State officials are weighing new rules to regulate New Jersey’s ABC test, which measures whether a worker is an employee entitled to unemployment, family leave, and disability benefits or an independent contractor who is not required to pay into the funds that fuel those benefits.
Proposed regulations for the test’s second prong — which measures whether a worker’s services are performed outside the usual course or place of an employer’s business — could solidify rules around ride-hailing employment.
Examples included in the proposed rule’s text would designate ride-hailing drivers’ vehicles as a place of business for the companies. Because a worker must meet all three of the ABC test’s prongs, the rule would effectively bar ride-hailing drivers from being classed as independent contractors.
