New Jersey has been cracking down hard on the gig economy, with state regulators and lawmakers both trying to put an end to businesses classifying their workers as independent contractors.
App-based businesses like Uber, Lyft, and Doordash make heavy use of contract workers to perform rides or drop off meals. These companies argue their business model helps them keep costs down, while offering people work opportunities that are far more flexible than traditional employment.
Critics contend that these companies are misclassifying their employees as independent contractors to avoid paying standard benefits like unemployment insurance, overtime, and minimum wage.
Those critics include the New Jersey Department of Labor and Workforce Development, which issued Uber a $649 million fine for unpaid unemployment and disability insurance taxes.
Uber, for its part, argues its drivers are properly considered independent contractors, and that it doesn’t owe the state any back taxes.
“We are challenging this preliminary but incorrect determination, because drivers are independent contractors in New Jersey and elsewhere,” an Uber spokesperson told The New York Times last week.
In recent years, companies like Uber and Lyft have provided workers a new opportunity to make a buck on their own schedules, choosing when to work and when not to work. Some drivers choose to work at “surge” times, when demand is high, to make more money. This kind of flexible work has created the gig economy — a burgeoning sector that employs 24 percent of adults.
But on Tuesday, California’s State Senate passed a bill that threatens to destroy all that. Assembly Bill 5 (A.B.5) would require companies like Uber, Lyft, DoorDash, and more to treat contractors like employees. This would involve offering benefits like sick and vacation days, health insurance, and other “protections” under the Fair Labor Standards Act, Americans with Disabilities Act, or the Civil Rights Act. Minimum wage, overtime pay, and unemployment insurance would also be involved.
All this can add 30 percent to labor costs, hitting gig employers hard. Yet all this also undermines the basic idea of the gig economy, by trying to pigeonhole flexible gig workers into the traditional employee mold — with set hours, company equipment, and a company workspace.