If regulators require Uber to classify drivers as employees, the business could see labour costs increase by 30pc.
The future of the gig economy in the US is becoming even more uncertain.
In September, California took a significant step towards implementing a bill that would ensure that contractors for food delivery firms, ride-hailing businesses and those in other industries such as janitorial workers, are recognised as employees and are entitled to benefits such as sick pay and annual leave.
Now, on the country’s east coast, it appears that New Jersey is also taking a stand against companies like Uber, which recognises drivers using its platform as self-employed contractors, rather than employees.
New Jersey’s department of labour and workforce development sent Uber and its subsidiary Raiser letters informing the businesses that they owe $649m in unemployment and disability insurance taxes to the state.
The state has been chasing Uber for unpaid employment taxes for at least four years, according to documents obtained by Bloomberg Law, which were accessed through an open public records request.
An audit by New Jersey’s labour department claimed that Uber and Raiser owed $530m in overdue taxes between 2014 and 2018, as well as a further $119m for non-payment.
Robert Asaro-Angelo, commissioner of the department, said: “[We are] cracking down on employee misclassification because it stifles our workforce and inflicts a huge financial toll on our economy.”
In a statement, Bhairavi Desai, executive director of the New York Taxi Workers Alliance, said: “It’s a stinging rebuke of the architects of the gig economy and we hope it permeates across other sectors. New Jersey is sending a message that the state’s labour laws aren’t dictated by corporations.”
Uber, however, disputes these claims. A spokesperson for the company said: “We are challenging this preliminary but incorrect determination, because drivers are independent contractors in New Jersey and elsewhere.”
On 7 November, a bill was introduced to New Jersey senate that could restrict when businesses are permitted to define workers as independent contractors, rather than employees who receive basic protections.
The New York Times estimates that Uber’s labour costs could increase by up to 30pc if the company was required to treat drivers as employees.