Legal Exposure of Uber in Gig Economy

This memo discusses the legal exposure of Uber in the gig economy and provides recommendations to reduce legal risks. It explores the agency relationship between Uber and its drivers, the responsibility of Uber towards the conduct of its drivers, and the liabilities Uber may face. The memo concludes with recommendations for Uber to reduce legal exposure.

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Student’s Name

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Contents
MEMO.............................................................................................................................................2
Introduction/ Summary 2
Uber in Gig Economy 2
Background 3
Principle of Agency 3
The responsibility of Uber towards the conduct of its drivers 5
Recommendations 5
Conclusion 6
References 8

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MEMO
To: Support Entrepreneur, An investment firm
From: Markian White
Date: 22-02-2019
Re: - Legal Exposure of Uber
Introduction/ Summary
A gig economy can be understood as a free market system where businesses contact the
independent workers for the short-term assignment (Welby, 2018). In such an economy,
temporary employment/ positions are common. This economy provides the freelancer liberty to
choose the assignment of his or her own wish and they get the remuneration for each of such
assignment. This kind of relationship proves beneficial for the employer as well as for worker.
On one side, the employer can save the cost of training, resources, equipment and workplace
maintenance by using this mode of working, workers can maintain the work-life balance on the
other side. Further, such contracts make the schedule of workers and employer flexible in
comparison to traditional employment contracts.
Due to such contracts, the image of such workers emerging as an entrepreneur rather than
the employee. Workers can take the assignments from multiple organizations and are not tied
with the rules of any single business.
Uber in Gig Economy
Uber is one of such business who provides independent assignments to drivers. The
question in such a situation is to check who will be liable towards a third party. It has been

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reviewed in many cases that a customer often held the Uber liable for the misconducts of its
drivers (Landsbaum, 2016). The reason behind the same is that customers consider such drivers
as an employee of Uber and think that any action against the company will be an action against
defaulting driver. Nevertheless, in actual the relationship between Uber and its driver is of the
agency. Drivers can be understood as an employee at will. It means they can leave employment
whenever they wish. In the gig economy, Uber has a status of trailblazers. It becomes the
responsibility of the company to adhere to the good corporate governance practices and to ensure
positive governance. Uber has developed certain code of conducts and principles, which are
applicable, its drivers.
Background
The purpose of the presentation of this memo is to evaluate and address the legal
exposure of Uber in respect to the conducts of its drivers. In the presented memo, the focus will
be developed on the liability of Uber as well as of its drivers. The nature of the relationship
between Uber and its driver held Uber responsible in some circumstances for the conduct of its
drivers. In such cases, it becomes risky to invest in this company for the investing firms. This
memo will address such circumstances where Uber will be responsible.
Principle of Agency
As mentioned above Uber and its drivers has an agency relationship, the following part is
focused on the principle of agency. This is to state that agency law consists of three kinds of
authority mainly. These authorities are mentioned as hereunder:-

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 Actual Express Authority Principle:-The first authority is an actual authority, which can
be expressed or implied. In actual express authority, the principal communicates
authority to the agent (Dunham, 2011). A principal is liable for the conduct of the agent
done by the virtue of such authority.
 Actual Implied Authority Principle:- Implied authority can be understood as an authority
to do the work, which is required to perform the act stated under expressed authority
(Miller & Jentz, 2009). In order words to say such authority is required to execute
express authority. The principal is responsible towards a third-party cause of this
authority.
 Ostensible Authority Principle: - The third kind of authority is an ostensible authority.
This is the authority, which a principal does not grant to the agent, but the principal
makes the representation that the agent has such authority. Such kind of authority can be
there even after the dismissal of an agent by the principal. Therefore, in such cases, the
principal is required to be more careful.
If to study these authorities in terms of Uber and its drivers, this is to state that under first
principle i.e. principle of actual authority, Uber gives instructions to its drivers regarding pick
and drop of customers and driver must follow this principle. The second principle, the principle
of implied authority gives the driver the power to conduct all those acts, which are necessary to
do order to complete the main task. Under ostensible authority, principal will not be liable
towards the third party, if such a third party would have knowledge about no authority of agents
(Mann & Roberts, 2016). There is also another principle under agency law, which is known as
the principle of ratification. This principle says that a principal can agree to bound with the
actions of an agent even in those situations where the agent has no authority. In such a situation,

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the principal is required to ratify the actions of the agent in order to take responsibility for his/her
conduct.
The responsibility of Uber towards the conduct of its drivers
The responsibility of Uber will vary according to the nature of the relationship with the
driver. In the past, many of the cases have happened there where Uber made responsible for the
conduct of its drivers. Such conducts included rape, fraud, and theft activities.
There are many situations, under which Uber can be held liable for the conduct of its
agents (drivers), because of vicarious liability rule. When a driver commits any conduct, which is
allowed by the principal under an agency, then Uber will be held liable for such conduct.
Further, if a driver would make any misrepresentation to a third party, then also Uber will be
held responsible for, applying the provisions of the agency. Many of the times, drivers commit
fraudulent actions; in such a situation, also Uber will be liable as the same is a principal. In a
conclusive way, this would not be wrongful to state that Uber will be held liable for the conducts
of drivers in general. Nevertheless, the same would not be liable in those cases where the third
party would have knowledge of no authority of driver.
Apart from the liabilities under agency relationship, Uber may also liable in those
situations where driver do not owe the required qualification to be a driver. Customers may bring
an action against Uber if they have drivers.
Recommendations
In the following part, certain recommendations have been made for Uber that the same
can adopt in order to reduce the level of legal exposure in relation to the conduct of its drivers.

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Firstly, Uber should make the relationship with drivers clear so that they would have an idea
about their responsibilities. Further, in order to make the rights and obligations clear, Uber
should dictate whether the drivers are employees of the independent contractor. While
developing the contracts with drivers, Uber is required to take extra care in relation to the factors
that courts check in the events of unethical practices by drivers. Although at first consumer of
services initiate the action against the company but when the matter goes into court, Jury
considers the contract developed between company and driver and then decides the liability of
parties accordingly. Therefore, Uber should be aware of the possible liabilities regarding
misconduct of drivers and should decide the terms of contract accordingly.
Further, Uber is also required to comply with the state legislation, which held the ride-
sharing companies liable to arrange secondary insurance for the drivers in addition to their
primary insurance coverage. Uber can decrease legal exposure following this significant step.
This insurance feature will be effective whenever the app would be turn on and not only when
the passengers are traveling in a cab. Most of the cases of misconduct happen from the side of
drivers when they are treated aggressively or in an adverse manner by the passengers. In such
situations, the driver also loses their control and negligently commits the misconduct. Uber can
prevent such issues by providing proper training to the driver in relation to deal with such
situations.
In conjunction with this, Uber can also limit legal exposure by providing training to its
drivers in relation to the direction throughout the city. The above-mentioned recommendations
will reduce the chances of misconducts and disputes and will reduce the level of legal exposure
for Uber in an indirect manner.

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Conclusion
To conclude the memo presented herewith, this is to state that Uber has huge legal risk
regarding the conduct of drivers. Customers often make claim against the company and being in
an agency relationship, Uber has to pay damages to the third parties. Recommendations have
been provided above, and by implementing the same, Uber can reduce the level of legal
exposure.

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References
Dunham, B., W. (2011). Introduction to Law. USA: Cengage Learning.
Landsbaum, C., (2016). Uber Just Settled a Huge Sexual-Assault Lawsuit. Retrieved From:
https://www.thecut.com/2016/11/uber-can-be-held-liable-for-its-drivers-sexual-
misconduct.html
Mann, R., A., & Roberts, B., S. (2016). Business Law and the Regulation of Business. USA:
Cengage Learning.
Miller, R., L., & Jentz, G., A. (2009). Cengage Advantage Books: Fundamentals of Business
Law: Excerpted Cases. USA: Cengage Learning.
Welby, J. (2018). Reimagining Britain: Foundations for Hope. UK: Bloomsbury Publishing.