The New Jersey Attorney General’s Office has announced that Lyft has paid off the $19.4 million it owed to the state for misclassifying drivers as independent contractors.
The dispute originated when Lyft drivers filed for unemployment and disability benefits, triggering an audit of the rideshare company’s records from 2014 to 2017 by the New Jersey Department of Labor and Workforce (NJDOL). Based on the audit results, NJDOL found that Lyft had improperly classified over 100,000 drivers as independent contractors rather than employees. As a result, Lyft owed over $10.8 million in contributions, plus penalties and interest.
Lyft contested the NJDOL audit findings, which transferred the dispute to New Jersey’s Office of Administrative Law (OAL) for a contested hearing. The company preemptively paid the overdue benefits to prevent additional interest from accumulating. However, just a few days before the first OAL hearing, Lyft withdrew its hearing request and paid the remaining balance of the interest, which amounted to almost $8.6 million.
When an employer classifies a worker as an independent contractor instead of an employee, that worker loses important rights and benefits. Those benefits include the right to make at least minimum wage, collect overtime pay, earn sick and family leave, and qualify for unemployment insurance and workers’ compensation benefits.
New Jersey’s Attorney General reiterated the intent of the state to enforce employee classification laws to protect workers and employers aggressively. Misclassification harms not only employees by eliminating important rights, but also employers who follow the law and pay their fair share of contributions to the state’s Unemployment Insurance (UI) Trust Fund. When employers don’t contribute to the fund by misclassifying employees, other employers in the state must pay for their lack of contributions. Furthermore, all contributions, penalties, and interest go back into the same funds that pay workers’ benefits and the costs of administering and enforcing contributions to the funds.
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