Gig economy can be described as a labor market that unlike most permanent jobs, this market is mainly composed of freelance work or short-term contract (Friedman, 2014). Employees in a gig economy usually have flexibility in terms of the hours they work while the employers only pay when the gigs are completed. Uber is one excellent company that demonstrates what gig economy is all about. However, the major issue with this kind of economy is that the employees under the contract with any gig company are usually independent with a minimum supervisor from the employers bringing in the question of should be held responsible when a legal issue arises. In the case of Uber, customers that use their services recognize the company as the main provider and when there is a legal case, they go after the company, not the drivers.
The main purpose of drafting this memo is to evaluate the pressing legal exposure that Uber gets as a result of their driver's behavior. Before making any investment, an investment company has requested the legal liability that Uber has with its drivers to be properly evaluated. As much as Uber has been able, to distance itself from the conduct of its drivers, there some instances where Uber can face several charges. Considering all the risks associated with a gig economy such as the one Uber exists in, it is, therefore, key evaluate all legal exposure that can arise.
Main Principle of Agency
Agency is an association that exists when an individual or a company is allowed to operate on behalf of another person under the Law of Agency (Meiners et al., 2014). The relationship that exists between Uber and its drivers is that of an agent and principal where the drivers are the agent which work for the principal which is Uber. Under the Law of Agency, three key areas exist which include how a third party understands agent and principal relationship, the association that exists between the agent and principal and the formation of agency relationship (Carroll & Buchholtz, 2014). The association that exists between the agent and principal is stipulated in contracts which describes the role each party has to play. It is key for the agent to ensure that everything they undertake is in the best interest of the principal. The principle, on the other hand, is required to give the agent full compensation and in cases where there are losses, compensation should be done efficiently. However, it is important for each part to play its role obediently and with complete loyalty. Before establishing the principal-agent relationship, it is fundamental to create an agency relationship whereby the formal agreement between the employee and the employer is made. For the employee to start working agency relationship must be created first. A key part of the Law of Agency is the liability that lies on the principle because of the activities of an agent (Carroll & Buchholtz, 2014). For this case, Uber is the principal and the conduct of its agents can be lead the company into some legal situations.
Uber Liability for Their Drivers
Law of Agency allows a principal to be held responsible for the conduct of an agent towards a third party. According to Meiners et al., (2014) when a third party or a client comes to an agreement with an agent, based on their perception, the principal can be held responsible as per what the client observes. In its operation, Uber categorizes its agents or drivers as independent employees meaning that their liability is reduced but there are cases where the drivers can be considered as Uber employment. Various nations where Uber operates have had cases where the drivers are considered as employees of Uber as opposed to being independent contractors. In such a case where the drivers are taken to be Uber's employees, their actions can directly affect the company.
To highlight how the agent actions can affect Uber, there has been some formal lawsuits made against the company mainly relating to verbal or physical abuse and sexual assault. One good example is when a rider Erica Holland, accused an Uber driver of assaulting her and she later filed a lawsuit against Uber (Della, 2018). In reaction against the lawsuit, Uber fired the driver immediately and brought in a legal expert to help with the case. Another case was when an Uber driver raped a woman in India and the company had to help throughout the case for the woman to get justice (Levine, 2018).
Another case when Uber is held responsible for the action of the drivers is when the clients are taken to undesignated locations or when the drivers drive recklessly. A client can file against Uber leaving them with no other option than to investigate and help the rider to settle any disputes. Uber is known to compensate the clients in situations where they experience minor misunderstanding so that they can maintain the reputation of the company (Cramer & Krueger, 2016). Another circumstance is when a driver acts within scope stipulated by the employer and the unlawful act occurs as he or she perform their job as described by the principal (Cramer & Krueger, 2016). If the driver hurts a rider when following the instructions given by Uber, the company will be responsible for these actions. This law is under the tort liability where an employer is responsible for what the employee does so long as they act according to guidelines stipulated (Carroll & Buchholtz, 2014).
Recommendations for Uber to Reduce Legal Exposure
Uber has had a fair growth over the years but legal exposure has threatened its growth and its therefore key for the company to develop proper agreements and policies. Uber has continuously brought in measures to make their clients feel safe but it important to have policies that their drivers understands and adheres to. One measure that can be taken is to ensure there is a proper screening of drivers to make sure they have the best employees who understand what the company is all about. When the drivers are properly screened, the ones that pass the test will understand that their action determines the outcome of the company and more importantly why the customer is the most important person. By doing this, the company will avoid paying their clients fees and also they will have a good reputation.
Another measure is to enact a disclaimer statement in their app that highlights the extent to which the company is responsible for the actions of the driver. When a rider requests a particular driver, he or she will have to accept the disclaimer before being taken to their destination. This will allow Uber to avoid some legal actions that can be damaging. Nevertheless, the best measure is instilling a high standard of conduct which all drivers must follow. A driver who shows a sign of poor standard should have his contract terminated as per the agreement when they were signing the contract.
Carroll, A., & Buchholtz, A. (2014). Business and Society: Ethics, sustainability, and stakeholder management. Nelson Education.
Cramer, J., & Krueger, A. B. (2016). Disruptive change in the taxi business: The case of Uber. American Economic Review, 106(5), 177-82.
Della, M. (2018). Uber sued by a rider who says she was groped by the driver. Retrieved from https://www.usatoday.com/story/tech/news/2017/06/22/uber-sued-rider-who-says-she-groped-driver/103117034/
Friedman, G. (2014). Workers without employers: shadow corporations and the rise of the gig economy. Review of Keynesian Economics, 2(2), 171-188.
Levine, D. (2018). Uber agrees to settle U.S. lawsuit filed by India rape victim. Retrieved from https://www.reuters.com/article/us-uber-rape-settlement/uber-agrees-to-settle-u-s-lawsuit-filed-by-india-rape-victim-idUSKBN1E300T
Meiners, R. E., Ringleb, A. H., & Edwards, F. L. (2014). The legal environment of business. Cengage Learning.
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