Uber Technologies Inc. was hit with bill for unpaid employment taxes and fines from New Jersey in November, to the tune of almost $650 million, marking another setback for the app-hailing firm as it struggles to prevent its drivers from being classified as employees. The state’s Department of Labor and Workforce Development demanded Uber (and a subsidiary, Rasier LLC) hand over the money for failing to pay employment taxes by, the state argues, misclassifying drivers as independent contractors.

The Labor Department said in letters sent to the firms that they owe $523 million in unemployment and disability insurance taxes for 2014 through 2018. The state added $119 million in penalties and interest.

The firms are contesting the decision. A spokeswoman for Uber said: “We are challenging this preliminary but incorrect determination, because drivers are independent contractors in New Jersey and elsewhere.”

The move comes as Uber and other ride-hailing companies such as Lyft Inc. fend off bids to extend employment protections to gig workers in other U.S. states. A bill in California recently reclassified some independent contractors, including drivers, as employees. N.J officials estimate that misclassification across the workforce costs the state’s almost 250,000 employers an additional $300 per employee because of insufficient funding to the state’s unemployment insurance trust fund.

Uber reported a net loss of $1.2 billion for the three months ending Sept. 30 and has a deficit of more than $15 billion since its 2009 inception.

Source:The Wall Street Journal

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