Uber is largely hailed as the advent of the gig economy, which is the idea that people will not work for any one employer, but instead will work on projects for any variety of companies desiring their services. While creating a new type of entrepreneurship for individuals, it raises a host of new legal questions for companies around the law of agency.
An investment firm has asked you to evaluate Uber’s legal exposure for the conduct of its drivers.
Write an interoffice memo in which you:
3.Identify the steps Uber can take, if any, to limit its legal exposure for the conduct of its drivers.
The Concept of Agency
Subject: conducting evaluation of UBER’s legal exposure to the conduct of its drivers.
In this Memo an attempt is made to analyse the legal exposure of Uber due to the behaviour of its drivers. Prior to understanding the basic principles of an agency some light must be thrown on the concept of agency (Ross, 2015). The concept of agency is basically based upon a special relationship or agreement between the principle and the agent. The heart of the agreement is based upon the fact that there are certain actions which the agent can undertake on behalf of the principle. It is one of the most common features that is being increasingly found in today’s commerce. This is because it allows flexibility of operation as one party can act on behalf of the other in his absence or with due delegation of authority. UBER has established similar relationship with its drivers as they can enter into transaction an agreement with the customers on behalf of the company (Davis, 2015).
It is important to note that the level of authority exercised by the agent on behalf of the principle will determine the extent of liability the principle has to bear with respect to the third parties. In general case the principle will be bound by only those actions of the agent which are within his scope of authority (Ross, 2015). The authority may be actual i.e. expressed or implied or apparent which means that the actions or words of the principle are such that a third party may infer that a separate person has a right to act on their behalf.
It must also be noted that only the principle doesn’t have obligations or duties to fulfil rather there are several duties which the agent must fulfil too. Some of the duties of the agents which ensure the sanctity and authencity of the decisions and actions undertaking by him are as follows:
- It his duty to follow the instruction of the principle.
- He must act in person and not through someone else.
- He must exercise due skill care and competence in carrying out his duties.
- He must always act in good faith.
- He must maintain the confidentiality at all times.
It can be seen and inferred that while UBER make use of the agents or drivers to conduct its overall business it might release itself from obligations towards the third parties in case the agents do not comply or breach their respective duties which are being entrusted on them by the company (Anderson & Huffman, 2017).
Some of the important points relevant to the concept of agency are:
- The agent will not incur any contractual liability in case of a valid contract being entered between the principle and the third party.
- The agent will be liable to the principle where the agent has breached the terms of the agreement or has acted in a way that is negligent towards his duties.
- If the agent has not disclosed the presence of a principle to the third party the agent will be liable to the third party.
- In addition to the above mentioned points the agents are liable to their principle in respect of tortious acts which fall outside their scope of authority (Paul, 2017).
- Actual express authority:
According to this principle the principle (Uber) enters into an explicit agreement with the agent to perform or participate in a certain task for e.g. taking orders from the customers for the drivers about where to pick and drop them.
- Actual implied authority:
Authority and Liability of the Principle
According to this principle the principle enters into a certain explicit agreement with the agents (drivers) that in certain cases though the authority has not been transferred to the agents specifically they can infer that the authority for that action or transaction has been delegated to them (Gould, 2017).
- The principle of apparent authority:
According to this principle the principle has no agreement with the agents rather the third party in this case the customers. This principle states that though the agreement is between the agents i.e. the drivers and customers to carry the passengers from one place to another there are certain scenarios wherein the driver cannot disobey the principle (Uber). For instance if the company instructs it to take another route due to bad road condition or traffic jams in the route, the driver cannot disobey the instructions as he is under an apparent agreement with the company.
- The principle of ratification:
Under this principle the company will be held liable for the actions of the agent or driver for which the authority was not delegated to him but after obtaining the knowledge about his actions they were ratified by the company (Hemel, 2017). For e.g. the driver drops the customer at a particular location without taking due permission from the company but, later on conveys the information to the company and the same is being ratified by the company. In this case the company is binding towards the action of the drivers as it has ratified the same.
- When the actions performed or the decisions taken by the drivers were within the scope of their apparent authority.
- If the drivers indulge in some kind of misrepresentation or fraud while staying within the limits of his apparent authority.
- In case of vicarious liability has arisen on the part of the company. Vicarious liability states that there must exist a functional relationship between the defendant and the wrong doer to justifiable establish that the defendant is liable to the claimant for the damages done by the wrong doer (Davis, 2017). It was held in the case of UBER vs. Berwick 2015 that the drivers of the UBER are employees and not independent contractors thus there is a fundamental relationship between the principle and the agent which is justifiable in holding UBER as responsible for any wrong doing of the drivers (Keeton, 2016).
- The implementation of the thought process that when the drivers are faced with an ostensible task they must prudently which is in confirmation to their conscience especially if the matter seems to be true.
- UBER is liberalising its authority over the decisions taken by its drivers in case of an emergency like taking a road accident victim to the nearby hospital without the prior permission of the company (Qian, 2016).
- The company is trying not to limit its liability towards its agents and drivers and involve itself in handling the cases of the third parties without making its drivers liable unless they expressly decide to be held liable (Conk, 2016).
- The company has expressly conveyed and have portrayed disclosures saying that if a person is booking a cab via UBER he is releasing the company from any liability or damage he might incur with respect to the actions of the third party driver (McPeak, 2016). Clauses may differ area wise but the theme of the clause remains same that the company should not be held liable in case the passenger suffers any sort of damage while travelling by the cab driven by one of the employees of the company.
It is expected that the above memo has been able to provide a clear understanding of the legal liability of the company.
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Davis, R. W. (2017). U.S. Patent Application No. 14/822,375.
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Hemel, D. J. (2017). Pooling and Unpooling in the Uber Economy. U. Chi. Legal F., 265.
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Qian, X. (2016). How newspapers present Uber's government relations in three countries: US, UK and China.
Ross, H. (2015). Ridesharing's House of Cards: O'Connor V. Uber Technologies, Inc. and the viability of Uber's labor model in Washington. Wash. L. Rev., 90, 1431.
Ross, H. (2015). Ridesharing's House of Cards: O'Connor V. Uber Technologies, Inc. and the viability of Uber's labor model in Washington. Wash. L. Rev., 90, 1431