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Uber is fighting a lawsuit that could upend its business

An illustration picture shows the logo of car-sharing service app Uber on a smartphone next to the picture of an official German taxi sign in Frankfurt, September 15, 2014. REUTERS/Kai Pfaffenbach

Uber on Thursday struck back in a high-stakes class action labor lawsuit that could upend its business model built on low-cost freelance workers.

The ride-sharing company asked a federal court in San Francisco to reject the categorization of the case as a class action suit. With an arsenal of evidence presented by one of the nation's top litigators on class action disputes, Uber said the complaints by three former drivers don't reflect the sentiment of its fleet of 160,000 past and current drivers in California.

The plaintiffs are among a small but growing number of former drivers who say they should have been categorized as employees, not independent contractors, of Uber and are entitled to past compensation.

The stakes are enormous. Uber's business model is built a software platform used by drivers whom the company considers contract workers. But increasingly, drivers complain that their work for Uber resembles that of an employee, a specific categorization under labor laws that affords workers benefits. For Uber, that could mean employee drivers could demand benefits and reimbursements for gas and other costs.

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The debate over definitions of workers carries important implications for the fast-growing "sharing-economy," in which companies such as TaskRabbit, Lyft and Uber tap millions of freelance workers for jobs such as food delivery, legal writing and valet parking.

Increasingly, freelancers and labor advocates have criticized sharing-economy companies for labor policies that don't provide health insurance and other benefits to workers. The companies argue that their services give people more flexibility to pursue jobs at their convenience.

The debate has led to questions over how to categorize freelancers of these companies. Last month, a California labor commissioner ruled in favor of a former driver's complaint of long hours and conditions without proper compensation. The driver, the commissioner said, should be categorized as an employee and was awarded $4,000 in expenses. The same commission argued two years earlier that a driver with a similar complaint wasn't an employee, but an independent contractor.

"But the law is clear that the relevant question is not whether people 'like' the practice at issue but whether it legal or not," said Shannon Liss-Riordan, an attorney representing the plaintiffs. "Employees can have flexibility also, and the mere fact that drivers can choose their hours does not make them independent contractors. If it did, then this would be an easy question, and the court would have granted Uber’s motion for summary judgment, which it denied in March."

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Uber's costs could explode if its drivers are determined to be employees. And if the court allows the federal suit to be filed as a class action case, damages could snowball.

The three drivers who filed the suit "seek an outcome that many, if not most, proposed class members oppose," Uber said in its motion of opposition to the court.

"Relying on outdated law and scant evidence, Plaintiffs seek to certify a statewide class of over 160,000 individuals with widely varying personal interests and circumstances who have used the Uber lead generation application to connect with millions of passengers over the past six years," the filing said.

Uber hired Theodore Boutrous, a partner at Gibson, Dunn & Crutcher, who won Wal-Mart's appeal of a class action gender-discrimination lawsuit at the Supreme Court. The  company presented testimonies of 400 California drivers who praised the service for providing flexiblity to their work.

"As employees, drivers would drive set shifts, earn a fixed hourly wage, and lose the ability to drive using other ridesharing apps as well as the personal flexibility they value most," an Uber spokesperson said in a statement. "The reality is that drivers use Uber on their own terms: they control their use of the app. It's why there is no typical driver -- the key question in the case."

The Federal District Court for the Northern District of California in San Francisco will hold a hearing on classification on Aug. 6.