Analyzing Agency Principles and Uber's Liability in the Gig Economy

This report examines the application of agency principles within the gig economy, specifically focusing on the potential liabilities of companies like Uber. It delves into concepts such as actual express authority, actual implied authority, apparent authority, and ratification, explaining how these principles can hold Uber responsible for the actions of its drivers. The report highlights instances where Uber may incur liability, including fraudulent activities, misrepresentations, and failures in corporate social responsibility. Furthermore, it offers recommendations for Uber to mitigate potential liabilities, such as providing comprehensive insurance coverage, clearly defining expectations for drivers, and addressing potential issues arising from third-party services. The analysis underscores the complexities of classifying drivers as independent contractors versus employees and suggests policy changes to avoid confusion and ensure customer safety and fair treatment of drivers. Desklib offers a platform to explore similar solved assignments and study resources for students.

Running head: THE GIG ECONOMY
The Gig Economy
Name of the Student
Name of the University
Author Note

1THE GIG ECONOMY
Inter-Office Memo
To:
From:
Date:
Subject: The Gig Economy
Summary Statement
The contractual or non-contractual relationship between the principle and the agent to
enter into a legal relation with the third party on behalf of the principal is regulated by the
principles of agency. In such a situation, the agent is allowed to make transaction on behalf of
the principal. As decided in the case of Harris v Knutson 35 Wis. 2d 567 (1967), the agent is
entrusted with the authority to promote the interest of the other party that is the principal.
Based on this principle, the principal can be considered as an employer, but not in every
cases. Agents are not always deemed as an employees that provides the rationale for the term
‘principal.’
As per the principle of agency, actual express authority provides that the principal
and the agent enters into an explicit agreement to participate in a given action as directed by
the principal (Fong & Li, 2017). For example, Uber has an agreement with the drivers to
specifically pick up and drop their customer from one place to another. An actual implied
authority refers to a principle when the principal enters into an agreement with the agent that
the agent, although not exactly authorised by the principal, may take action on certain issue,
based on the believe that the authority for taking that action has been delegated by the
principal to him. According to the principles of agency, apparent authority is when the
principal has an agreement with the third party and not with the agent. For instance, if Uber

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orders the driver to not to take a particular route for dropping the customer due to the poor
condition of the road, the driver will follow such order of Uber as he has apparent authority.
Along with that, the principle of agency provides the principle of ratification. In such a case,
the principal agrees to a contract of the agent when learns about the existence of such
contract. This ratification makes the principal liable for the contract. If a driver having no
authority to drop a customer does that anyway, the contract is binding on Uber if they agrees
to the contract once he learns about the conduct of the driver.
Liability of Uber for the conduct of the drivers
The gig economy has allowed the individuals to continue or terminate the job
relationship with the principal. It has recognised the part of independent contractors because
of the free market structure (Lao, 2018). It can be said that Uber is operating in the gig
economy as the role of the drivers are similar to that of the independent contractors. A
question arises while imposing liability on the principals for the act of the drivers in such a
situation.
Uber may acquire liability for the conduct of their drivers in certain circumstances. In
the light of this fact, Uber shall be liable for the apparent authority of the driver, as they are
responsible for promoting the interest of the principal (Lee, 2014). Uber shall also be liable
for a fraud or misrepresentation made by the drivers acting within his scope of apparent
authority. Recently, Uber and one of its driver was charged with sexual assault committed by
the driver (Forbes.com. 2018). Uber failed to learn that the driver had a pending charge
against him at the time they hired him.
Applying the principal of ratification, Uber can also acquire liability for the act of its
driver if he accepts the request of a drunk customer to give him a ride. If the passenger induce
the driver to commit any violent act, Uber shall be liable for the damages the customer

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suffers. From failing to provide customer safety to underpay the drivers, there has been
several incidents that makes Uber liable for failing to oblige with the corporate social
responsibility.
Recommendation
To avoid acquiring any liability for the act of the drivers, Uber may limit their liability
with the help of various steps. They should provide insurance to cover any damages of the
customers. They should also specifically mention their expectation from their agents. They
should address the potential issues that may arise from the third party services. Explaining the
role of the drivers to them may help to manage the activities of the agent. The authority
should be given to the driver to decline a request of a passenger who is drunk or may become
a cause of conflict. Though Uber mention their driver to be an independent contractor, still
they take the service of the driver as an employee (Todolí-Signes, 2017). Confusion may
arise in such cases to impose liability for an injury or damage caused to the customer, and to
avoid such confusion they should follow to mentioned steps and change their policy.

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References
Dalley, P. (2011). A theory of agency law. University of Pittsburgh Law Review, 72, 495-
547.
Fong, Y. F., & Li, J. (2017). Relational contracts, limited liability, and employment
dynamics. Journal of Economic Theory, 169, 270-293.
Forbes.com. (2018). Retrieved from
https://www.forbes.com/sites/omribenshahar/2017/11/15/are-uber-drivers-employees-
the-answer-will-shape-the-sharing-economy/#65c52cc95e55
Harris v Knutson 35 Wis. 2d 567 (1967)
Lao, M. (2018). Workers in the “gig economy”: The case for extending antirust labor
exemption. University of California, Davis, 51, 1543-1587.
Lee, P. W. (2014). The Apparent Authority of the Unauthorised Agent.
Todolí-Signes, A. (2017). The ‘gig economy’: Employee, self-employed or the need for a
special employment regulation? Transfer: European Review of Labour and
Research,23(2), 193-205. doi:10.1177/1024258917701381