Lyft has agreed to hand over $19.4 million to New Jersey to settle claims that the ride-hailing company wrongly treated its drivers as independent contractors instead of employees. The announcement came Thursday from Robert Asaro-Angelo, Commissioner of the state Department of Labor.
The settlement covers nearly $11 million in unpaid taxes tied to unemployment, disability, and family leave programs between 2014 and 2017. Another $8.5 million accounts for penalties and interest that piled up after the state’s audit.
Labeling workers as independent contractors allows companies to avoid payroll taxes and leaves drivers without access to benefits such as family leave, unemployment insurance, or disability coverage.
“Misclassification imposes a financial toll on both good actor employers and misclassified workers, who lose critical rights such as minimum wage, overtime pay, workers’ compensation coverage, unemployment insurance, earned sick leave, family leave, and more,” Asaro-Angelo said.
Lyft Pushback
Lyft continues to argue that its drivers are contractors, not employees, but said it will not fight New Jersey’s decision further.
“While we disagree with the NJDOL’s findings, we will not be pursuing further challenges to the assessment,” said company spokesperson CJ Macklin.
The payout follows a 2022 case involving Uber, which reached a $100 million settlement with New Jersey over similar claims tied to unpaid contributions between 2014 and 2018.
The Bigger Picture
The Labor Department’s audit began after some Lyft drivers applied for unemployment and disability benefits. Lyft initially contested the findings but dropped its challenge in August, just days before an administrative hearing. The company had already paid the $10.8 million in back taxes to keep interest from climbing.
Attorney General Matt Platkin, whose office represented the Department of Labor, said the state will continue to hold corporations accountable.
“We will not allow businesses to exploit workers by misclassifying them, stripping employees of essential benefits and avoiding their responsibility to support programs that protect our workforce,” Platkin said.
The New Jersey Digest is a new jersey magazine that has chronicled daily life in the Garden State for over 10 years.