The Main Principles of Agency Law
Agency relationships exist between the company and its labor force. Agency is a relationship between two parties – the principal and the agent – in which the agent acts on behalf of the principal (Miller, 1, p. 574). An agent is a person who can complete tasks and enter into contracts in the name of the principal, thus binding the principal to a contract. A principal is a party that entrusts agents with the ability to represent the principal and is entitled to control that agents exercise their powers solely for the employer’s benefit (Miller, 1, p. 574). The agent’s duties are accounting, obedience, loyalty, notification, and performance (Miller, 1, p. 581).
The principal’s duties include compensation, cooperation, reimbursement and indemnification, and a safe working environment (Miller, 1, p. 582). Whenever two parties agree that one of them will be acting on behalf of the other, agency relationships are established, and the court will apply agency law to determine the obligations and rights of the parties.
Regarding Uber, the company’s drivers should be considered agents, and Uber – is the principal. This is because agency relationships are established whenever a written or oral agreement is reached between the two parties (Miller, 1, p. 579). Uber drivers voluntarily download and register in the Uber app, which allows them to receive orders and act on behalf of the Uber company. Although they may not sign a written agreement, they consent to perform tasks assigned to them by the company’s app, which is why they can be considered agents.
Further, Uber views its drivers as independent contractors because it exempts the company from paying certain taxes, compensating for expenses, providing benefits, and covering healthcare costs (Andoyan, 2, p. 163). Uber’s main argument is that drivers exercise a large portion of control over their activities. However, the court may not agree with this status of drivers because Uber’s business cannot exist without them, and it has much control over drivers’ work (Andoyan, 2, p. 160). For example, Uber requires drivers to provide their personal information, watch their ratings, and control the process of payment. In addition, independent contractors are usually highly skilled or possess unique skills (Miller, 1, p. 576). Operating a vehicle is not a unique or complex skill, which is another reason why the court may consider Uber drivers to be employees rather than independent contractors.
Uber’s Liability
Since Uber has much control over its drivers’ performance, guides their work by the app, pays them once a week, and does not require them to possess unique skills, its drivers can be classified as employees. The principal’s liability to the agent’s torts is based on whether the employee acted within the work scope. If the damage was done when an employee acted within the scope of employment, the employer might have liability (Miller, 1, p. 587).
In this case, it is not important whether the employer was undisclosed or fully or partially disclosed (Miller, 1, p. 587). In case of the employee’s negligence, the principal is held liable under the doctrine of respondeat superior (Miller, 1, p. 590). Thus, if the Uber driver caused personal property damage and bodily injury when performing an order from the Uber app, Uber could be held liable because its agent acted within his work scope. Furthermore, Uber may be held accountable if it is proven that it hired a substandard driver or allowed for using a substandard vehicle (Mudrić, 3). In this case, Uber would be involved in tortious conduct resulting from its own negligence.
Even if the court agrees that Uber drivers are independent contractors, Uber can be held liable for a car accident involving personal property damage and bodily injury if it occurred while the driver was acting within his work scope. The principal is generally not accountable for the independent contractor’s torts; however, if hazardous activities are involved in the execution of the agreement, strict liability can be applied (Miller, 1, p. 592). Uber can be held liable for its driver’s conduct in jurisdictions where strict liability is applied to traffic and related accidents (Mudrić, 3). If the injured passengers seek civil remedies in court, they may obtain compensatory damages for the incurred loss, including injuries and property damage.
Recommendations for Limiting Legal Exposure
Companies can limit their legal exposure by treating their agents as independent contractors rather than employees. However, Uber already does so; the company positions its agents as independent contractors because drivers have much control over their schedule and the number of completed orders (Andoyan, 2, p.160). Treating its drivers as independent contractors makes Uber not liable for their torts unless strict liability regarding traffic accidents is applied in the jurisdiction where the company operates.
Another thing that Uber can do is eliminate the possibility of being liable for its own tortious conduct. The case of Natural Gas Processing Co. v. Hull shows that the principal can be held liable for independent contractors if the principal does not provide the necessary instructions and reasonable care to its agents (Supreme Court of Wyoming, 4). Therefore, Uber should carefully select drivers and establish a code of conduct for them. The company should ensure that its drivers work in an alert state and operate properly functioning vehicles according to traffic regulations.
Finally, Uber can include an indemnification clause in agreements with its drivers. As the case of Estes Express Lines, Inc. v. Chopper Express, Inc. shows, the court finds indemnity agreements enforceable because the public policy does not “forbid a party from indemnifying itself against its own negligence through a contractual provision” (Supreme Court of Virginia, 5). It means that an indemnification clause will oblige divers to reimburse for damages if an accident occurs due to their own negligence.
Sources
- Roger LeRoy Miller. 2016. Business Law Today: Text and Summarized Cases (11th edition). pp. 574-598. Web.
- Andre Andoyan. 2017. Independent Contractor or Employee: I’m Uber Confused! Why California Should Create an Exception for Uber Drivers and the “On-Demand Economy.” pp. 153-173. Web.
- Mišo Mudrić. 2020. Nature of Uber Services. p. 34. Web.
- Supreme Court of Wyoming. 1994. Natural Gas Processing Co. v. Hull. Web.
- Supreme Court of Virginia. 2007. Estes Express Lines, Inc. v. Chopper Express, Inc. Web.