More good news for Uber:
Uber Technologies Inc. owes New Jersey about $650 million in unemployment and disability insurance taxes because the rideshare company has been misclassifying drivers as independent contractors, the state’s labor department said.Bloomberg Law
Oops. For those who haven’t been following this saga closely, Uber’s entire business model depends on classifying workers as independent contractors.
The state’s determination is limited to unemployment and disability insurance, but it could also mean that Uber is required to pay drivers minimum wages and overtime under state law. Uber’s costs per driver, and those of Lyft, could jump by more than 20% if they are forced to reclassify workers as employees, according to Bloomberg Intelligence.Bloomberg Law
In other words, this is just the begining. Uber isn’t anywhere close to profitable. If the cost of workers goes up 20%, investors are not going to be happy.
The notices mark the latest attack on the rideshare companies’ business model, which treats drivers as self-employed entrepreneurs rather than employees—a classification that deprives the workers of certain benefits. Uber and Lyft recently pledged $30 million each to fight a new California law that is expected to force them to reclassify drivers as employees. They’re also prepping for a similar lobbying battle in New York, where lawmakers are planning to take up gig worker legislation next year.
“I expect we may see more of this,” Shannon Liss-Riordan, an attorney who has sued Uber on behalf of drivers in California and Massachusetts, said of New Jersey’s tax claim against Uber. “Uber and Lyft, by misclassifying drivers, are harming not only the drivers but also the states and the public at large. The money that they’re not paying into the unemployment and disability systems is being picked up by the states and the taxpayers.”Bloomberg Law
Surprise, surprise. Uber and Lyft, the hot tech companies of the last decade, are built on a business model that is fundamentally flawed.
Just as Uber and Lyft try to grapple with losses and legal action, Tesla is going to unveil the Tesla network and full autonomy.
Gather your popcorn, the fireworks should be fun to watch.