Legal Liability and the Gig Economy
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Legal Liability and the Gig Economy
Summary statement
Uber Company started its operations in 2009 and currently operates with more than one million drivers across the globe. It serves at least 400 cities that are spread to about 100 countries globally. The company allows potential clients to request for travel services through their smartphones. Upon request of the services, the individual is connected with an Uber driver who offers the transport service using their cars. This new form of entrepreneurship for individuals has created several legal questions for Uber Company around the agency law (Loewenstein, 2017).
Background
Principles of agency
The Agency of law is a relationship between Companies or an individual known as the principal that legally authorizes an individual known as the agent to acts on their behalf. An agency can be by explicit appointment. However, it can also be by implication. In an agency relationship, an agent may possess ratified authority, actual authority, or apparent authority (Howard, 2014). Ratified authority refers to the agent acting without authority from the principal but later receives approval from the principal, which ratifies the act. Actual authority refers to the principal asking for the act by the agent on the principal’s behalf. This kind of authority is clear. Apparent authority refers to a third party believing that another party is the agent of the purported principal. This implication by the third-party arises from their belief, which is informed of the principal’s conduct or statement. The agent must uphold their principal by being loyal, obedient, accountable, highly performing, and responding to notifications. The principal must also reciprocate the agent by compensating, reimbursing, indemnifying, cooperating as well as providing safe and friendly working conditions. If the principal controls the agent and holds them responsible for their acts then the relationship is said to be employer-employee. Otherwise, the relationship is an independent contractor where the principal has no control over the agent and is not liable for the agent’s acts (Howard, 2014).
The legal risk with Uber model
The principles of agency relate to Uber’s relationship with its drivers and apply when the company engages in a wrongful act. Uber is a vast company in transportation especially in the taxicab services, which provides self-employment for its drivers. The drivers are the agent while the company is the principal for them. The agency law in this regard refers to the relationship between the principal (Uber) and the agent (the drivers) during their transactions. Through its online applications, the principal appoints the drivers to represent it and execute necessary decisions. The agency relationship between the two parties gives the driver legal authority to act on behalf of Uber (Barnes and Oldham, 2019).
Being the agent's principal, Uber becomes part of corporate governance. The relationship between Uber and the drivers is guided by the agency theory, which states that the agent must execute responsibilities in the interest of the principal. The agency relationship, therefore, binds both parties since the drivers register with Uber as its agent for the company.
The circumstances under which Uber might be liable for the conduct of a driver
Uber drivers have actual authority from the Uber Company. In the event the Uber drivers get intoxicated and cause an accident involving personal property damage and bodily injury, Uber would be held liable for the conduct under the following circumstances. The law would hold Uber liable for the wrongful act if the drivers (agent) engaged in the act to the extent of their duty because of the instructions that Uber (principal) gave the driver. The law would hold Uber liable for the conduct of their drivers about the performance contract signed with its drivers. When Uber’s drivers do a wrongful act in the scope of Uber’s employment then the driver exposes the company to vicarious liability. This means the agency law would hold Uber liable for the torts of its drivers, even though the directors of the Uber did not commit the accident themselves. This vicarious liability exposes the employer to the liability of the torts of their contractors that occur in the course of their duty. Uber may also be held responsible if its driver declines to meet a particular target that the Uber Company has already guaranteed to the client. Uber Company in its services guarantees to its clients that it would avail its required expectations. The personal damage caused by the driver becomes a liability to the company because of the undue influence of the alcohol (Ambrosini, Collier, and Jenkins, 2016).
Steps Uber can take, if any, to limit its legal exposure due to the conduct of its drivers
It is paramount for Uber to observe precautionary measures in protecting itself from legal exposure for wrongful conduct by its drivers. In the recent past, Uber has experienced several legal cases for the conduct of its drivers and it has many times paid huge amounts in compensation. Certain steps are therefore necessary for the Uber Company to take to avoid such vicarious liabilities. First, there has to be an equal relationship between the defendant (Uber) and the wrongful driver. According to the law, the Uber Company should be informed that it is only liable for the actions of the wrongful driver and not the client. In avoiding such scenarios, it is paramount that Uber Company takes legal initials as prescribed by the agency that its actions will bind them. The driver’s action must always be true and legitimate. In this case, the drivers must too be responsible and be liable for their conduct. This type of scenario can be avoided if Uber conveys its relationship with the drivers and the liability arising from the driver’s actions (Loewenstein, 2017).
Uber should also carry on an extensive check on the background of their drivers. For instance, fingerprints checks are not a requirement for Uber as opposed to taxi companies. Uber needs to do fingerprint checks to be able to determine the criminal history of its potential drivers. Uber can also limit their legal exposure by checking if their potential driver has met all the insurance requirements before allowing them to pick up their passengers because the personal cover is not enough to cover passengers. Uber must, therefore, correct these issues to avoid being a target by the many lawsuits that arise from the wrongful conduct of their drivers.
Since Uber is the principal and the drivers are its agents that the company hires through its application their relationship applies on both. Uber should be liable for the action of its driver in certain circumstances. Nevertheless, Uber can follow certain steps to avoid legal exposure from certain risks that may occur. The decisive point on this memo is that the principal and agent relationship applies to the Uber and its driver. Uber should start carrying on an extensive check on the background of their drivers before engaging them with their services.