Uber: The Principal-Agent Relationship


The Principal-Agent relationship is manifested in the fact that the principal assigns an agent to legally act on its behalf. It is important to note that both agent and principals must not have a conflict of interests because their legal cooperation needs to be in a singular direction. For an agency relationship to be functional, both parties are required to adhere to their duties and responsibilities. One of the most critical aspects of an agent is the fact that it possesses a fiduciary duty before the principal. In other words, an agent is obliged to act in the best interest of the corresponding party.

However, it is also important to note that a principal also has several responsibilities and duties owed to an agent. There includes indemnification, compensation, contract adherence, and fair dealing. In other words, a principal must fully compensate an agent for their work and also repay for all incurred spending on the tasks done by the agent. In addition, there is a need for contract adherence and fair dealing, which means that both parties follow the rules and norms agreed in the contract.

Main body

The scope of employment is a critical concept, which describes the level of the employer’s responsibility for his or her employees. Uber drivers are not employees of the company, but independent contractors (Hawkins, 1). Both company and drivers sign a contract in the form of the Principal-Independent contractor or agency relationship, which means that drivers act on behalf of Uber, but are not held under the scope of employment, where the drivers’ actions could be blamed on Uber.

The company presents itself as a platform and brand provider, whereas drivers are independent contractors. The law states that if a person’s services can be controlled by an employer, it means that he or she is no longer considered as an independent contractor (“Independent contractor defined,” 2). This means that Uber drivers must not be controlled by Uber for them to remain independent contractors and agents. For example, Uber lost an appeal against a case on employment rights, where they were not paying a living wage and benefits (Butler, 3). This shows that Uber either needs to give full control to drivers or accept them as employees.

A principal is obliged to compensate and indemnify an agent by paying the latter for his or her losses and work. In addition, a principal must adhere to the contract and good faith to ensure that an agreement is properly executed (“Agency law – agent law,” 4). Uber cannot be held accountable for its drunk drivers, because they are independent contractors and perform their services in freedom. To shift the blame towards Uber, it is important to prove that Uber drivers are indeed employees. For instance, an agent needs to be completely free from a principal’s control to be considered an independent contractor (Jennings, 5).

The deceased passenger’s next-of-keen can argue that Uber must treat the driver as an employee because the company does not give full control of service performance to drivers (“Agency law – agent law,” 4). It is mainly because the company platform assigns clients, determines fees, and gives directions, which are all controlling factors for drivers. Therefore, an Uber driver will no longer be considered as an independent contractor, but as an employee, which means that the company needs to be held responsible for the drunk driver’s actions.


Uber needs to implement several changes to effectively decrease the overall legal exposure. The company can either give total freedom of service performance to drivers or recognize them as employees. The latter option is implausible because, for such a large company, there is a substantial cost associated with operating expenses. In addition, it is important to note the fact that Uber is not a profitable company, which means that it cannot select the second option as a solution. However, it can give more control to its drivers to not be held responsible during legal exposures. Four major points in the Principle-Agent relationship law are compensation, fair deal, contract adherence, and indemnification.

The legal step is manifested in Uber adjusting its contract to give agents full control over their service by not assigning the fees and clients but allowing drivers to select them on their own. As it was mentioned, the Employer-Employee relationship for Uber is impossible due to their financial state, but the Principal-Agent requires more elaboration. The latter relationship includes the factor of indemnification, which cannot be provided by Uber (Jennings, 5).

In addition, it is challenging what the given term means in the context of Uber. The court can conclude that it includes gasoline fees and car repair and maintenance services, which cannot be provided by Uber. The company should adhere to its statement of drivers being independent contractors, which means giving total freedom for the contractors over their service performance. This means that the company should not determine fees, routes, and clients, but give full access to all of them, and thus transition into a bidding system.


  1. Hawkins, A. J. (2019). Uber drivers are freelancers, not employees, federal labor lawyer says. The Verge. Web.
  2. Independent contractor defined. (2020). Web.
  3. Butler, S. (2018). Uber loses appeal over driver employment rights. The Guardian. Web.
  4. Agency law – agent law. (2020). Web.
  5. Jennings, M. (2017). Business: Its legal, ethical, and global environment (11th ed.). Boston, MA: Cengage Learning.

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BusinessEssay. 2022. "Uber: The Principal-Agent Relationship." November 20, 2022. https://business-essay.com/uber-the-principal-agent-relationship/.

1. BusinessEssay. "Uber: The Principal-Agent Relationship." November 20, 2022. https://business-essay.com/uber-the-principal-agent-relationship/.


BusinessEssay. "Uber: The Principal-Agent Relationship." November 20, 2022. https://business-essay.com/uber-the-principal-agent-relationship/.