The Trial That Could Devastate the "Sharing Ecoomy"

Uber, you might recall, is very rich. It’s racked up billions of dollars in funding for a valuation somewhere in the realm of $40 billion. Lyft, its main rival, isn’t doing too shabbily either. Late on Wednesday, Lyft confirmed a new $530 million funding round that brings its valuation to more than $2.5 billion. There are lots of reasons for those eye-popping estimates: good service, smart algorithms, aggressive expansion. But another one, which often gets forgotten, is the employment agreements both companies have with their drivers. On Uber’s and Lyft’s platforms, drivers are treated as independent contractors; they are responsible for paying on-the-job costs like gas and vehicle maintenance out of their own pockets and don’t receive any benefits, which translates to huge savings for their companies. Now though, Uber and Lyft are facing a serious legal challenge to the independent-contractor portion of their business model—and, by extension, the rest of the “sharing economy” is as well.