New Jersey’s Department of Labor recently slapped Uber with a $650 million bill in unemployment and disability taxes. This is because the state is claiming that the ride-share company is “misclassifying drivers as independent contractors, Vice reports.
The size of this bill has been years in the making, Vice says: over the past four years, New Jersey has been working to have Uber pay $54 million in overdue taxes, and after an audit last year, $523 million in past-due taxes and around $119 million in interest and penalties on the unpaid amounts.
Uber could be in even bigger financial trouble with the passage of the Assembly Bill 5 in California, which will require app-based companies to treat contract workers as employees. These changes might cost Uber up to $500 million, Vice says, pointing to one Barclays analysis. Vice also says that there’s a chance other states will follow California’s lead for independent contractor classification, which “could cost Uber – a company that has never made a profit – billions of additional dollars in labor costs.”
Aside from pressuring the ride-share company to pay bills, hundreds of thousands of drivers working are taking Uber to court “for earnings deductions, misclassification, unpaid benefits, and more,” Vice says. Similar to the doors opened by California’s Assembly Bill 5, New Jersey’s bill may encourage other cities and states to make the case that drivers are misclassified, and encourage more drivers to seek benefits owed to them.
If Uber ends up having to pay these high bills, and needs to add more money for labor costs to its business model, it could be detrimental to the ride-sharing company’s success, Vice says. Uber has not yet made a profit, and is expected to be profitable by 2021; it currently stays afloat from investors. “The difference between Uber peak private valuation and today’s valuation is around $75 billion,” Vice says. “I don’t know about you, but if a company loses $75 billion in value, then maybe it shouldn’t exist.”