The Main Principles of Agency Law
Agency law is a commercial law area that revolves around the principal-agent relationship. Most of the organized human activity, including commercial one, is carried out through an agency, which makes this concept of particular importance. Furthermore, business organizations and enterprises depend on agents and how well they perform their responsibilities. In particular, the gig economy as a free-market system based on freelance work and short-term contracts identifies a new context for employers and employees to operate in.
A number of concepts are involved in the law on the agency. An agency relationship refers to a scenario where one party (the agent) provides consent to act on behalf of another party (the principal) and take on a range of duties, rights, and liabilities by virtue of a contract (Jennings, 1). A principal is a person, corporation, organization, or government agency that has the legal capacity to enable an agent to perform a task. In turn, an agent is an individual representing the principal and carrying out tasks on their behalf. A principal owes the duties to compensate, reimburse, and indemnify the agent (Jennings, 1). An agent owes the fiduciary duty and a number of general duties to the principal, as per agency law (Jennings, 1). In this regard, the agency is a consensual and fiduciary relationship that involves responsibilities for both sides.
In relation to Uber as part of the gig economy, a number of agency law principles apply. In particular, the express authority principle suggests that Uber (the principle) enters an explicit agreement with drivers (agent) and provides them with authority to deliver people from one point to another. Another principle is the apparent authority which provides that the principal has agreements with the third party, namely, customers, if they are led to believe that there is an agency relationship (Loewenstein, 2).
The principle of ratification is another concept that applies to Uber and suggests that the principal can decide that the contract can be honored as if the agent has the full authority if when they do not (Jennings, 1). The working status of Uber drivers has caused numerous discussions even though their status is defined as independent contractors in the Service Agreement. However, as reported by SAY Hukuk Burosu, “on 19 February 2021, UK Supreme Court delivered a ruling which classified app-based UBER drivers as workers, instead of independent contractors” (2, para. 10). In other words, an agency relationship exists between Uber and the drivers.
Uber’s Liability for the Conduct of a Driver
When it comes to the liability of a principal for an agent’s torts or wrongful acts, the principal can be held responsible as a result of the legal authority given to the agent. Moreover, according to Jennings, “the liability of the principal for contracts made by an agent is controlled by the perceptions created for and observed by the third party to the contract (1, p. 570). There are several scenarios that might be involved, such as the disclosed, the partly disclosed, or the undisclosed principal.
In this regard, Uber might be held liable for the driver’s conduct when the agent’s actions were within the scope of the apparent authority. Furthermore, the principal is also accountable for any fraud committed or misrepresentation made by the drivers acting within the action of apparent authority (Loewenstein, 2). However, it is complicated due to the discrepancy between the drivers’ status of independent contractors proclaimed by Uber. For instance, in a scenario where a driver sexually assaults a passenger, the agent will be subjected to face the law while the company will not be held liable. In turn, Uber company should be held responsible if an agent causes an accident and a passenger succumbs to injury. It is worth noting that the most evident party at fault is the driver; at the same time, in this case, the driver acts within the scope of apparent authority.
According to the same principle, Uber should be held liable for the conduct of a driver who, while intoxicated, caused an accident involving personal property damage and bodily injury. At the same time, the independent contractor status implies that the principle is not liable for the tort and an illegal act of the agent in this scenario (Jennings, 1, p. 575). Such a statement suggests that the driver would be personally responsible for the damage caused.
The Uber company has a commission agent type of relationship, which involves supplying the service of connecting the drivers with the customers online and providing navigation services for consideration. Furthermore, the company controls the drivers’ activities and has a zero-tolerance policy towards drunk driving (Loewenstein, 2). It can be complicated for the injured passenger to take legal action directly against Uber. The company has liability policy limits, and a number of factors need to be considered, including whether the application was in use at the time of the accident.
Steps Uber Should Take to Limit its Legal Exposure for the Conduct of its Drivers
The Uber company claims that the drivers are considered independent contractors and not employees. In doing so, it limits its legal exposure for the drivers’ conduct. There is a broad range of law issues that can arise in the company’s business environment. According to Loewenstein, an employer’s failure to establish and implement effective policies promoting the safety of agents and customers can result in clients’ and employees’ claims (2). Indeed, the company has faced numerous lawsuits since its establishment. In most cases, Uber was held liable for the misconduct of its drivers in spite of the fact of the Independent Contactor relationship and often unawareness of the misconduct itself (Loewenstein, 2). In order to prevent such situations, the agency should initiate relevant legal inclinations that will bind the agent to take prudence and be liable for their conduct.
There is a number of steps Uber can take to limit its legal exposure for the conduct of its drivers. In particular, the company can display the terms and conditions as the customer signs up and uses the application, explicitly stating that the driver should be held personally liable for illegal acts. Another step to limit Uber’s legal exposure is to include the subject of ensuring safety and following the legal terms of locality in terms of the contract with drivers. Furthermore, another option for the company is to include a section in terms of the contract with drivers that provides that the driver shall be personally liable to the customer for any damages occurring due to their misconduct. According to Jennings, “principals are not generally liable for the torts of independent contractors” (1, p.575). Hence, it is worth noting that the Independent Contactor relationship would limit Uber’s exposure most.
Sources
Marianne M. Jennings. 2016. Business: Its Legal, Ethical, and Global Environment. Web.
Mark J. Loewenstein. 2017. Agency Law and the New Economy. Web.
SAY Hukuk Burosu. 2021. UBER Drivers: Employee, Worker or Independent Contractor? Web.