Skip to content
  • MyNewMarkets.com
  • Claims Journal
  • Insurance Journal TV
  • Academy of Insurance
  • Carrier Management
Insurance Journal - Property Casualty Industry News

Featured Stories

  • Ivans: Commercial Lines Market Overall Remains Firm
  • House Committee Advances TRIA Bill
  • Articles
  • Jobs
  • Markets

Current Magazine

current magazine
  • Read Online
  • Subscribe
  • Login
  • Front Page
    • National
    • International
    • Most Popular
    • Magazine
    • Forums
    • Blogs
    • Videos/Podcasts
    • Newsletters
  • News
    • Most Popular
    • National
    • International
    • East
    • Midwest
    • South Central
    • Southeast
    • West
  • Magazines
  • Research
  • Directories
  • Jobs
  • Features
    • Events
    • Forums
    • Market Directories
    • Quotes
    • Polls
    • Rankings & Awards
    • Insurance Giving Back
  • Subscribe

Uber Driver Case Tests ‘Sharing Economy’ Business Model

By Eric Newcomer and Joel Rosenblatt | August 4, 2015
Email This Subscribe to Newsletter
  • Article

The most serious challenge to Uber Technologies Inc.’s “Be your own Boss” business model might also present an early test to the wider sharing economy as well as undermine its own $50 billion valuation.

The immediate battle comes Thursday in San Francisco, where Uber is seen as having a difficult task in persuading U.S. District Judge Edward M. Chen to block a lawsuit seeking to reimburse 160,000 California drivers for mileage and tips from proceeding as a class action.

Chen’s decision hinges on the broader issue of whether Uber drivers are independent contractors, as the company claims, or employees entitled to unemployment and workers’ compensation as well as the right to unionize. The issue is already fodder for the 2016 presidential campaign, with Democrat Hillary Clinton drawing fire from Republican rivals after saying the sharing economy, though promising, raises “hard questions about workplace protections.”

Besides crimping Uber’s “drive whenever you have time” motto, a ruling treating drivers as employees, if upheld on appeal, would dampen profits. It would also raise the same specter for other companies operating in the “sharing,” “gig” or “on-demand” economy, which pair customers with products through apps and typically avoid the costs of traditional employment. The Uber lawsuit before Chen, the most advanced of similar cases, argues the model violates labor laws.

‘Legal Uncertainty’

The case is significant for firms that farm out work to others in exchange for a share of the revenue they generate, said Christopher Sagers, a Cleveland State University law professor. “I think that a plaintiff win would put them in some legal uncertainty,” he said.

Two Uber investors who asked not to be identified said the company could survive any decision requiring it to treat drivers as employees.

Uber’s value might drop because it’s based partly on the arrangements with drivers. Treating them as employees would add to costs and probably shrink profit.

Classifying drivers as employees would result in higher prices, and fewer Uber drivers overall who must work longer hours, said Arun Sundararajan, a professor at New York University’s Stern School of Business. The higher costs would be passed on to consumers, with reductions in drivers’ income and Uber’s cut of their fares, he said.

The effect on Uber’s global revenue would likely be small, Sundararajan said. “I think the real risk is that if they lose in California, other states will follow,” he said.

Lyft, Homejoy

Chen has already ruled that a jury will decide the case if it goes to trial. Other sharing-economy companies are paying attention to Uber’s fight.

Shannon Liss-Riordan, the lawyer representing the drivers, has filed similar cases against companies including Uber competitor Lyft Inc., as well as sharing-economy ventures Caviar Inc., Postmates Inc. and Homejoy Inc., an on-demand house cleaning company that ended operations on Friday.

Homejoy Chief Executive Officer Adora Cheung said her company buckled under the weight of the litigation threat.

Uber’s spread in the U.S. and around the world has been pockmarked with lawsuits and prosecutions over accidents and alleged crimes by drivers including rape. The company is also subject to government probes of whether it violates labor laws and local regulations designed largely for taxi service.

The drivers’ case may succeed — or not — based on whether it proceeds as group suit. Stanford Law School Professor William Gould called it a “good candidate” for a class action, which increases defendants’ potential costs and gives plaintiffs leverage to negotiate a deal.

Independence, Flexibility

Uber stresses the independence and flexibility drivers enjoy — they can work whenever and as often as they like. It claims to rely on as many as 17 different licensing agreements for drivers.

Some of the licensing agreements describe a “mutual right to terminate,” which Uber argues is typical of independent contractor relationships. Others give Uber the right to terminate for specific misconduct and require a minimum amount of notice, according to the company.

Chen would be required to make too many “individualized inquiries” assessing each driver’s understanding of Uber’s policies to make a group lawsuit viable, the company argued.

‘Singular’ Point

Uber’s ability to terminate drivers at will, or for any reason and without warning, is of “singular importance,” the plaintiffs argue in a court filing. That policy proves Uber’s control, which means the drivers qualify as employees, according to the filing.

For Uber, the road ahead isn’t likely to get easier, according to Sagers and Gould.

FedEx Corp. lost an appeal in a case brought by its drivers and agreed to a $228 million settlement. That deal is scheduled to be considered by Chen Thursday, just before Uber’s hearing.

The FedEx case works in Uber’s favor, said Theodore Boutrous, one of the ride-share company’s lawyers.

“FedEx delivery drivers do not have anywhere near the flexibility or autonomy that drivers who use the Uber app have,” Boutrous said in an e-mail. “Uber has none of these types of rigid controls over drivers; indeed, most drivers value Uber precisely because they are not subject to this type of inflexible arrangement.”

The case is O’Connor v. Uber Technologies.

Related:

  • Will Uber Employee Status Ruling in California Impact Its Business Model?
  • New Worker Classification Needed for Sharing Economy, Uber Drivers
  • Commission Rules Uber Drivers Employees, Not Contractors
  • Labor Department’s 6-Part Test for Classifying Employees, Independent Contractors
  • Uber Expected to Ride Out Employee Ruling, Maintain High Valuation
  • NYC Taxi Regulator Sides With Uber in Employee vs. Contractor Debate
Copyright 2026 Bloomberg.

Topics Lawsuits Personal Auto Sharing Economy Ridesharing

Was this article valuable?

Thank you! Please tell us what we can do to improve this article.

Thank you! % of people found this article valuable. Please tell us what you liked about it.

Here are more articles you may enjoy.

Alabama DOI Report Shows Litigation Is Up, Raising Liability Costs and Rates
Forecasters Warn of ‘Potentially Catastrophic’ Storm From Texas to the Carolinas
Wells Fargo to Move Wealth Headquarters to West Palm Beach
Zurich Makes £7.7 Billion Bid for Specialty Insurer Beazley

Written By Eric Newcomer

More From Author

Written By Joel Rosenblatt

More From Author

Interested in Lawsuits?

Get automatic alerts for this topic.

Email This Subscribe to Newsletter
  • Categories: National NewsTopics: corporate sharing economy, gig economy, Homejoy, individual sharing economy, labor laws and ridesharing, O’Connor v. Uber Technologies, on-demand economy, sharing economy, Uber employees, uber independent contractors
  • Have a hot lead? Email us at newsdesk@insurancejournal.com
More News
Kin Moves Into Florida and Texas With Home-Auto Bundle Products
GEICO Settles Call-Center Worker Suits for $940,000; Attorneys Get Half
Dutch Court Rules Uber Drivers Can Be Treated as Self-Employed
Do New Yorkers Pay Too Much for Auto Insurance?
More News Features

Read This Next

  • Uber Driver Case Tests 'Sharing Economy' Business Model
  • Procter & Gamble Tweaks Toothpaste Packaging for Texas AG's Fluoride Concerns
  • Rideshare Drivers Protest Robotaxis as California Considers More Regulations
  • Florida Lawmakers Ready for Another Shot at Litigation Funding Limits
  • Zurich Makes £7.7 Billion Bid for Specialty Insurer Beazley

Insurance Jobs

  • Underwriting Manager - Philadelphia, PA
  • Outside Property Claim Associate - Bothell, WA
  • Workers Compensation & Liability Counsel - Newark, DE
  • Senior Data Scientist Manager – Behavioral Science - Illinois, IL
  • Insurance Agency Bookkeeper – REMOTE - Remote
MyNewMarkets
  • Insurtech Lemonade Starts Autonomous Car Product With Tesla's Data
  • Adjusters Launch 'CarFax for Insurance Claims' to Vet Carriers' Damage Estimates
  • Every Superman Has His Kryptonite: How to Protect Key Executives with Specialized Coverage
  • Emerging Risks to Watch: Space Weather, Quantum Sensors, and Digital Addiction
  • Driving Passion, Protecting Value - What Every Agent Should Know About Collector Vehicle Insurance
Claims Journal
  • London Cyber Attack Threatens to Hold Up Thousands of Home Sales
  • US Airlines Cut Flights Again as Another Winter Storm Looms
  • Michelle Licht joins Sinistar as Vice President of Business Development – USA to Lead Next Phase of Market Expansion
  • Nvidia Unveils AI Models for Faster, Cheaper Weather Forecasts
  • Florida Board Drafting Rules That Could Stem Bogus Engineering Reports in Claims
Academy of Insurance education
  • January 29 Period of Restoration: One Concept You Need to Get Right
  • February 5 Ethics Frontier: Navigating AI and Claims in the Age of Complexity
  • February 12 Who's Driving This? Where Are We Going with Autonomous Vehicles?

Insurance News

  • News by Region
  • News by Topic
  • Yesterday

Site Search

Features

  • Insurance Markets Directory
  • Forums
  • A.M. Best Company Ratings
  • Industry Events
  • Agencies For Sale
  • Newswire
  • Insurance Jobs
  • Rankings & Awards

Connect with us

  • Email Newsletters
  • Magazine Subscriptions
  • For Your Website
  • RSS Feeds
  • Twitter
  • Facebook
  • LinkedIn
  • Do Not Sell My Info

Insurance Journal

  • Submit News
  • Advertise
  • Subscribe
  • Reprints
  • Link to Us
  • Contact Us

Wells Media Group Network

  • Insurance Journal
  • MyNewMarkets.com
  • Claims Journal
  • Insurance Journal TV
  • Academy of Insurance
  • Carrier Management
© 2026 by Wells Media Group, Inc. Privacy Policy | Terms & Conditions | Site Map