Lyft is paying $19.4 million to New Jersey since it has misclassified its drivers as independent contractors. Here’s the story.
The issue of tagging drivers, independent contractors
Until today, the issue of tagging drivers as independent contractors still looms. But what really is the root issue here?
The issue of tagging rideshare drivers as independent contractors may sound good to the ears, when in fact, it is not. The issue here is on the balance between business flexibility and worker rights.
Companies like Lyft and Uber argue this branding allows drivers to keep their autonomy, so that they could work according to times most convenient for them.
However, critics are saying that when these drivers are branded “independent contractors,” they are stripped of critical employee benefits like minimum wage protections, overtime pay, health insurance, and unemployment benefits.
Likewise, these drivers face unstable incomes, covering hefty costs, such as fuel, car maintenance, and insurance without support from their employers. Under this classification, they are also not allowed to establish unions or negotiate for better work conditions, placing them at a really vulnerable position despite their role in the gig economy.
Legal battles to combat this issue are present worldwide, such as this news you would read about. The debate continues about whether drivers should instead be classified, simply, as “employees.”
Whopping $19.4 million
Now, Lyft has paid a whopping $19.4 million to New Jersey, following this audit saying that the ridesharing company has improperly classified over 100,000 drivers as independent contractors, state officials shared late last week.
Officials, which included state Attorney General Matthew Platkin, noted that Lyft has issued the payment after withdrawing its request for a hearing to challenge an audit by the New Jersey Department of Labor and Workforce Development of its books and records from 2014 to 2017.
The authorities found out that Lyft never made contributions to state funds within those years, representing drivers, so these drivers are deprived of protections, such as unemployment compensation, temporary disability benefits, and family leave.
The ridesharing company was assessed over $10 million in previous due contributions, together with over $8 million penalties and interest. The company was able to pay the former just to stop interest from running, and paid the remainder after ending its challenge.
Furthermore, Lyft has reached $27 million under similar circumstances with Massachusetts last June 2024.
‘No reason’
Lyft has issued their official statement, saying that the right classification must be given to drivers under New Jersey law.
“While we disagree [with the findings,] we will not be pursuing further challenges to the assessment,” Lyft stated.
Regulators stand by the issue discussed earlier that misclassifications are depriving drivers of benefits, which include minimum wage, overtime pay, and sick leave.
“There is no reason temporary or on-demand workers who work flexible hours, or even minutes at a time, can’t be treated like other employees,” New Jersey Labor Commissioner Robert Asaro-Angelo told Ridesharing Forum.
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