On November 12, the state of New Jersey sent a bill to Uber Technologies for $459 million and a bill to its subsidiary Rasier LLC for $642 million seeking unpaid contributions, penalties, and interest. The bills cover 2014 through 2018 and allege a failure to make required payments under the New Jersey Unemployment and Temporary Disability Insurance Laws.
Contributions, of course, are due only for employees, not independent contractors. And there’s the rub. Like many states, New Jersey uses an ABC Test to determine whether a worker is an employee or an independent contractor for unemployment insurance purposes, and the state is claiming that Uber and Rasier misclassified drivers.
Uber and Rasier will appeal, and there are defenses available. They have good arguments, and they will assert them vigorously. But the stakes are high, and the outcome is uncertain. When a state brings a claim like this one, a company’s arbitration agreements and class action waivers don’t help. These are not arbitrable claims.
The takeaway for businesses that use independent contractors is that they need to be aware of the risks presented by state agencies. States can initiate audits or investigations, even without a worker complaint; and when they conclude that one contractor was misclassified, they tend to extrapolate and find that all similarly situated contractors were also misclassified. The numbers get really big, really fast.
Trying to persuade a state agency to drop an investigation can be difficult too — and this, dear reader, is where I reward those of you who have kept reading, and I offer you the following story, which is 100% true.