Uber is largely hailed as the advent of the gig economy, which is the idea that people do not work as permanent employees for one employer but instead work in a labor market characterized by short-term contracts or freelance work. While creating a new type of entrepreneurship for individuals, a gig economy raises a host of new legal questions about the law of agency for companies utilizing gig workers.

Your boss at an investment firm has asked you to evaluate Uber’s legal exposure for the conduct of its drivers, given the information below and identify, and to explain the law and legal liability in this vast new gig economy world.

Write a 3–4 page interoffice memo in which you do the following:

Summarize the main principles of agency law as they relate to Uber’s relationship with its drivers.
Analyze the circumstances under which Uber might be liable for the conduct of a driver who, while intoxicated, caused an accident involving personal property damage and bodily injury.
Identify the steps Uber can take, if any, to limit its legal exposure due to the conduct of its drivers.

UBER

Legal exposure and liability

The gig economy is characterized by the nature of the relationship between the principal and the agent, where the agent is independent of the principal. The agency relationship is characterized by freelancing and non-permanent contracts. This is the case at Uber. In such a relationship, the legal liability of the principal for its agents’ conduct can be difficult to determine. The law clearly stated the legal exposure and liability of such a principal for the torts and conduct of its agents.

Principal-Agent relationship

A principal-agent relationship consists of two parties, where one party (agent) acts on behalf of the other (principal).  Agency relationships are governed by common law, not by statutory law. Agents must act in the best interest of the principals, exercising loyalty, care, trust and obedience. Principals must compensate and indemnify the agents (Jennings, 2018). Uber drivers are agents of Uber. They drive the vehicles and deliver services to Uber customers and clients on behalf of the corporation. If they enter into contracts with proper authorities on behalf of Uber, the contract is legally binding to the corporation but not to the driver. These drivers are not employees, but independent contractors.

Employees are greatly under the control and supervision of the employer during work hours, have regular working hours and regular pay. The employer has a responsibility to pay the employee, submit statutory deductions and withhold income taxes. Uber drivers have the freedom to work during their most convenient hours. The pay is not regular and depends on the trips made by the driver. An independent contractor acts on behalf of the principal, but the principal has no wage tax responsibilities towards the agent. The contractor finds their way to complete the job and chooses their tools of work and schedule (Alexandrea, 2019). Uber drivers have no fixed schedule determined by Uber. They use their vehicles for service delivery, of which the choice of the model of the car is determined by the driver, not by Uber.

Principal’s liability for the tort of the agent

A principal’s liability for the torts of the agent depends on the type of agency relationship and the conduct. If the principal controls the work hours and assignments of the agent, as in an employer-employee relationship, they are liable for the agent’s torts when the employee is acting in their employment scope. The principal will is also held liable if the tort was caused by the employer’s actions or negligence in hiring and supervision (Jennings, 2018). If the agent is an independent contractor, the principal is not liable for their torts. The exception is if the activities to be carried out by the agent are inherently dangerous or if the independent contractor was negligently hired by the principal or if the principal has laid out the specifications for the processes and procedures to be used by the agent.

As an independent contractor, the driver’s work hours and assignments are not controlled by Uber, and thus the corporation should not be answerable for the driver’s actions and conduct during working hours. In the case of National Security Agency (NSA) vs US Investigations Services (USIS), an employee of USIS, Snowden, left the company after leaking data from the NSA. USIS was held liable for this tort as it had not done a thorough background check on Snowden before hiring him. USIS had been negligent in hiring the agent. Likewise, Uber should be held liable for the conduct of the drunk driver and the damage that resulted in his actions (Lumen Learning & Williams, 2020). The injured passenger should seek compensatory damages for the property damage, medical expenses and emotional distress caused and punitive damages to prevent Uber from negligently hiring drivers in future and causing damage to more passengers.

Recommendations to limit principal’s legal exposure for the agent’s conduct

In taking legal steps to limit legal exposure to the Uber drivers’ conduct, Uber will be trying to limit their liability for agents’ torts. Uber can take a step by raising a defense of contributory negligence whenever they are faced with such a case, such that the liability is shared between corporation and the third party, as they both contributed to the damage through their negligence. Raising an assumption of risk defense is also a reasonable step to take. In the case of Lisa Winters vs YMCA, Lisa made vigorous jazz dance moves without wearing the appropriate dancing shoes. She knew the risk of making such a move but went ahead to do it. She was eventually injured. The YMCA and their jazz instructor could not be held fully liable for the damage, as she was aware of the risk of her negligent actions. Likewise, Uber should take steps to ensure that they are not held fully liable for any damage that occurs to their passengers as the customers are fully aware that taking a ride is already a risky affair (Uber Technologies, 2020). In case the passenger did not take safety measures like fastening their seatbelt, then Uber has firmer ground for reducing their liability for such damages, since the passenger was also negligent..

An independent contractor reduces the liability to the principal as compared to an employee-employer relationship. In the case of Jason Fowler vs United States, Garrick, an independent contractor with the Buckley Air Force, injured Fowler during the lunch hour. The US stated that Garrick was not within the scope of his employment, thus neither Buckley nor US were held liable. McDonald’s was held liable when their employee, Theurer, caused an accident and died and injured Faverty (Jennings, 2018). Theurer had been working for long hours at McDonalds and fell asleep while driving home.

Conclusion

Uber’s relationship with its drivers is that of an independent contractor. They are not to be held responsible for the actions of their drivers, unless under the exception of inherently dangerous activities, negligence or specifically laid out procedures. Uber can take legal steps in limiting their liability for their drivers’ conduct by making a defense of contributory negligence or assumption of risk.

References

1. Jennings, Marianne. 2018. Business: Its Legal, Ethical, and Global Environment (11th ed.). pp 555-593
2. Linda Williams and Lumen Learning. 2020. Tort Law, Liability and Damages. https://courses.lumenlearning.com/wmopen-introbusiness/chapter/tort-law-liability-and-damages/
3. Ravenelle Alexandrea. 2019. Journal of Managerial Psychology : “We’re Not Uber:” Control, Autonomy, and Entrepreneurship in the Gig Economy, Vol 34. DO – 10.1108/JMP-06-2018-0256
4. Uber Technologies Inc. 2020. US Terms of Use. https://www.uber.com/legal/en/document/?name=general-terms-of-use&country=united-states&lang=en