The Uber Business Model Continues to Take Hits Across the Country

| Nov 15, 2019 | Employment Litigation |

As we’ve covered in detail on this blog, the gig economy, particularly the model followed by companies like Uber, has been struggling to defend the independent contractor model of hiring. This struggle has been particularly obvious in California with the California Supreme Court’s Dynamex ruling on employee classification and the passage of AB 5 that followed. Now, New Jersey is the latest state to take aim at Uber.

The New Jersey Department of Labor and Workforce Development recently demanded Uber pay $649 million for unpaid employment taxes, stating that the company misclassified its drivers as independent contractors. Uber is, of course, fighting the determination made by the Department.

While the outcome of the fine by New Jersey could change, it is, in and of itself, another flashing red sign for companies like Uber, as they face continued push back across the country. On top of New Jersey and California, similar laws to AB 5 are being contemplated in other states, such as Washington and New York.

These ongoing challenges to Uber and its business model seem likely to require a massive change by the company. While the company, and those like it, may be able to fight off some of these attacks, it seems unlikely they will be able to come out of it wholly intact, and operating in the same way as they have been since their inception. Some of this change is seen in Uber’s attempts to combat AB 5 where they offered health benefits to workers.

Another issue to continue to track in this is whether these challenges to Uber end up spilling over into other industries the way AB 5 seems to have uprooted employment law entirely in California. The change being witnessed in the state may soon be something we see happening across the country as well, potentially causing seismic shifts to the employment market in the country as a whole.

With the employment market largely in flux, it is more important than ever for employers to have experienced employment and transportation lawyers on their side to navigate changes and make sure they comply with the new law and avoid being hit with potentially devastating lawsuits.