An arbitrator has ordered Uber to pay $40m to the parents of a 23-year-old woman who was killed after one of its drivers ejected her and a friend from his car on the side of a California freeway - a ruling that politely dismantles the company's favorite legal fiction.

Retired California judge Richard A Stone, serving as arbitrator, found that the ride-share company was "vicariously liable" for the driver's negligence. Vicarious liability, for those unfamiliar, is the legal principle that you can be held responsible for the actions of someone you have a relationship with - a concept Uber has spent years and considerable legal fees arguing does not apply to it.

The events in question began in August 2023, when Emily Normandin-Parker and Luna Moore hailed an Uber after a night out in Orange county. The driver pulled over on the 73 freeway after Normandin-Parker vomited in the car, attorneys said. While Moore and the driver argued over a cleaning fee, Normandin-Parker got out of the car, wandered into oncoming traffic and was struck by a car.

Normandin-Parker's parents accused the driver and Uber of negligence. Uber countered with its standard defense: that it is just "a technology company that provides a software platform connecting riders with independent third-party drivers who perform the transportation." In California, under Prop 22, Uber and Lyft drivers are categorized as independent contractors rather than employees - a designation the company has leaned on to argue it isn't liable for what its drivers do. The arbitrator, however, rejected the argument that Uber should be treated as a mere platform connecting drivers and riders.

In arbitration documents released by the family's attorney on Thursday, Stone wrote that Uber should be treated as a common carrier - which is any entity or individual that transports people or goods - and thus should be held "vicariously liable" for the incident. "The fact that Uber uses a digital interface rather than street hails does not change the fundamental nature of the service being offered," the arbitration documents read. Stone further asserted that Prop 22 does "not immunize Uber from vicarious liability for the torts of its drivers."

Uber, for its part, said it respects the arbitration process but that the arbitrator "was wrong in holding Uber legally responsible for the tragic events of that night." Spokesperson Gabriela Condarco-Quesada added: "No family should have to suffer the loss of a child, and our thoughts continue to be with the Normandin-Parker family. We have continued to strengthen our approach to safety over the years, through new technology, policies and safeguards informed by safety experts, including additional guidance to drivers about avoiding drop-offs in unsafe locations."

The family further asserted that Uber at one point proposed a settlement that included a confidentiality agreement. As part of that agreement, the family said they would have been charged a $10m penalty any time they spoke about the accident and Uber's connection to it. The family said they rejected the settlement, and Uber said it "ultimately did not pursue confidentiality in this case."

The ruling holding Uber liable for the negligence or actions of its drivers is not binding and applies only to this case. But it forms part of the company's broader battle to be treated as merely an online marketplace for rides - and to keep its drivers at sufficient contractual arm's length that their actions, legally speaking, belong to someone else.