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Challenging “The Gig Economy” Model: Whereby Multi-Billion Dollar App-Based Companies Refuse to Compensate Innocent Victims Injured by Their Workers

The New York Times ran an editorial on Sunday that began with this trenchant observation:

There is a long history of businesses that try to deprive workers of the protections and benefits they are entitled to under the law by wrongly treating them as independent contractors, rather than employees. Now, some workers and regulators are accusing companies like Uber, which connects cars with passengers on mobile apps, of doing the same thing to the thousands of drivers, couriers and others who work for them.

The new “gig economy” app-based companies similarly try to deprive innocent victims, injured by the negligence of their workers, from receiving fair compensation.

Under California law, an employer is legally responsible for any negligence committed by its workers during the “course and scope” of their employment. For example, if a Fed Ex truck driver making deliveries runs a red light and strikes a pedestrian, then the injured pedestrian may bring suit against Fed Ex. Fed Ex stands in the shoes of its driver and must compensate the pedestrian for any injuries caused by the negligence of its driver. Legally, this is known as the doctrine of “respondeat superior” liability and it has been the well-established law of this state, and most other American jurisdictions, for many decades. As one court wrote 45 years ago:

‘[T]he modern justification for vicarious liability is a rule of policy, a deliberate allocation of a risk. The losses caused by the torts of employees, which as a practical matter are sure to occur in the conduct of the employer’s enterprise, are placed upon that enterprise itself, as a required cost of doing business. They are placed upon the employer because, having engaged in an enterprise which will, on the basis of past experience, involve harm to others through the torts of employees, and sought to profit by it, it is just that he, rather than the innocent injured plaintiff, should bear them; and because he is better able to absorb them, and to distribute them, through prices, rates or liability insurance, to the public, and so to shift them to society, to the community at large.’

Hinman v. Westinghouse Elec. Co. (1970) 2 Cal.3d 956, 959-60 (citation omitted).

Because of the doctrine of respondeat superior, Fed Ex, UPS, Greyhound and other large companies who employ drivers carefully screen and train their employees on safe driving practices and the rules of the road. These programs help make society safer as their company-wide accident rates tend to be lower compared to drivers who do not get screened and trained. When their drivers do make mistakes and hurt people, the companies must pay fair compensation to the victims. The companies understand and accept the fact that this is a fair “cost of doing business.”

However Uber, the app-based ride service which has a $50 billion market valuation, and other gig economy employers, believe they should be exempt from the doctrine of respondeat superior.

San Francisco is ground zero for the app-based gig economy. Uber, Airbnb, Lyft, and numerous startups that hope to have multi-billion-dollar initial public offerings are based here. A common attitude amongst their founders seems to be that they should not be liable for injuries caused by their workers, whom they like to call “independent contractors.”

For example, a lawsuit was filed against Uber stemming from the New Year’s Day 2013 death of a 6-year-old San Francisco girl. Uber took the position in that lawsuit that it was merely an app company, that the driver was not its employee or agent, and that it had no legal responsibility to compensate the girl’s family. That case recently has ended with a confidential settlement and undisclosed terms.

For more than 50 years the lawyers in our firm have fought on behalf of our injured clients to receive fair compensation from big companies and insurance companies. We are deeply troubled by this latest attempt to create an extreme departure from a sensible and time honored legal doctrine that is intended to compensate innocent victims. Uber, Lyft, Ontrac, OrderAhead, Sidecar, Airbnb, and other gig economy companies should not receive preferential legal treatment compared to the other companies that screen and train their employers and accept liability when their workers do cause harms.

Anyone interested in learning more about this topic is invited to contact Walkup partners Michael A. Kelly mkelly@walkuplawoffice.com or Matt Davis mdavis@walkuplawoffice.com.