June 25, 2015

Uber Ruling Puts Sharing Economy's Business Model in Limbo

by Erin Coe

A recent ruling by the California Labor Commissioner’s Office that a driver for Uber Technologies Inc. was an employee and not an independent contractor may push companies in the sharing economy to take a more hands-off approach with workers to avoid claims that their control over job details looks too much like a traditional employer-employee relationship, lawyers say.

A hearing officer at the Labor Commissioner’s Office on June 3 ordered Uber to reimburse Barbara Ann Berwick for about $4,000 in expenses she accrued as a driver for the smartphone-based ride-hailing service last year.

While companies in the sharing economy are going to be closely following what courts have to say about worker classifications, they see their current business model as offering many benefits for workers, particularly in the freedom it gives them to plan their own work schedules.

“[Companies are] trying to create a free-market economy where individuals have more flexible options to make money,” said Charles Thompson, vice chair of Polsinelli’s Labor and Employment Practice Western Region. “Individuals choose to drive for companies like Uber and Lyft so that they have more flexibility and control in their lives. Many of those drivers can choose and in fact do earn their living from multiple sources."

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