UBER’s Ethical and Legal Issues

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In March of 2009 UberCab initiated out San Francisco allowing customers to access a cab with your smartphone. Ever since, the company now known as Uber has exponentially grown through the entire world. Operating in 58 countries, it is valued over 60 billion dollars. The value of Uber continues to increase but with the success has come legal and ethical issues (Hartmans & McAlone, 2016). Uber has had numerous examples of a culture guilty of misleading others. Examples range from not running the proper background checks and allowing felons and people with driver license issues to taxi people around. Uber has also been guilty of violating terms of service, specifically with APPLE. Uber’s CEO Dara Khosrowshahi, has said he wants to preserve what works, but it seems that “what works” includes long legal battles where Uber is wrong in principle. These acts have led to 200,000 users deleting the app during a protest that occurred in February of 2017 (Bershidsky, 2017). In this essay, we will discuss in depth the specific laws that have made Uber unethical and a subject to the legal system. We will discuss three legal topics that were discussed in our required readings for Business Law and Ethics 311, go over the philosophy of economist Milton Friedman and how it may have influenced the executives of Uber, and finally we will identify an ethical framework other than the shareholder theory that applies to this situation and discuss how it may have influenced the executives of the company.

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“Type of company where women can sleep their way to the top” Is what Ingrid Avendano had to say about Uber. Ingrid Avendano was a former engineer at Uber. She started working at the company in 2014 and left the company in 2017. Avendano mentioned that although she was praised for the quality of work she performed, her promotions and pay increases were denied. The denials were a result of her reports of misconduct to the company. She sued the company, claiming to be sexually harassed by a co-worker. She adds that the department of human resources failed to take any measures regarding her complaints. Many of her complaints went ignored, according to Ms. Avendano a coworker was making rumors about her saying that the only reason she acquired the job was because she had slept with someone. Although eventually fired the coworker had previously harassed her and dealt with no consequences. This was not the only occurrence of sexual harassment, according to Ms. Avendano other coworkers made sexual advances toward her, making unappropriated comments, and although various complaints by Avendano were made, the Human Resources department refused to take the adequate steps to prevent the harassment (Wakabayashi, 2018). This was not the only case of sexual harassment Uber was accused of. Susan Fowler, also a former engineer, accused her direct supervisor of sexually harassing her. Fowler reported the incidents to human resources but was ignored. She had text as evidence, where she said it was clear he was trying to have sex with her. The Department of Human Resources told Fowler that her direct supervisor was a high performer and they wouldn’t feel comfortable punishing him for what was probably an innocent mistake (Isaac, 2017). According to the U.S. Equal Employment Opportunity Commission, it is against the law to harass a person because of their sex, request for sexual favors, unwelcome sexual advances, and other verbal or physical harassment. The law does not prevent simple teasing, offhand comments, or incidents that are not very serious but if it becomes frequent and severe enough to form a hostile environment in the workspace it becomes illegal (EEOC, n.d.). Sexual Harassment was not the only specific law that applies to Uber.

Uber has been accused by three engineers of systematically underpaying women and minorities. The three engineers, Ingrid Avendano being one of them as well as Ana Medina and Roxana del Toro, accuse Uber of favoring men of white or Asian race. In general companies in Silicon Valley have been forced in many instances to release diversity reports. One of the plaintiffs, Ms. Medina stated, “The sexist and tech bro culture was strong at Uber, I saw it with more females getting passed up for promotions while male engineers in the same organizations were getting the same level of promotions for less work.” The U.S. Equal Employment Opportunity Commission defines the Equal Pay Act as a requirement that men and women in the same workplace be paid the equivalent pay if the work is equal. Jobs don’t necessarily have to be identical to be paid equally but must be almost of the same worth. What defines a substantially equal job is job content, not the title. Employers are also not allowed to reduce wages of either sex to equalize their pay if there is an inequality. Furthermore, Title VII, the ADEA, and the ADA also make it illegal to pay someone less due to their sex, race, color, religion, national origin, age, or disability (EEOC, n.d.). Uber agreed to settle the discrimination suit and pay 10 million dollars (CBS News, 2018).

Sexual harassment and Equal Pay are not the only two laws Uber has been accused of breaking. Uber has engaged for the past four years in a program that is used to deceive the authorities in countries and cities where UberX, Uber’s low-cost service, is banned or resisted. The technique Uber used was called Greyball. Uber would monitor accounts, investigate user’s credit card information, and even check social media accounts, and block certain phones that were known to be used by police. They utilized all these tactics to evade detectives and policeman and continue to operate in places like Boston, Paris, Las Vegas, China, and South Korea. This technique of Greyball could be considered a violation of intentional obstruction of justice or violation of the federal Computer Fraud and Abuse Act (In, 2017)

Trade secrets are something not generally known. It provides a competitive advantage to the owner. Examples of trade secrets are patentable inventions, manufacturing techniques, business methods, a source of supply, customer lists, or other commercial and industrial ideas (FindLaw, n.d.). Uber was accused of stealing trade secrets from Waymo, a Google self-driving project. Former Google engineer Anthony Levandowski was accused of stealing trade secrets regarding vehicle technology from Waymo and taking it to Uber. Waymo claimed that before Levandowski left his job at Google, he downloaded 14,000 files that pertained to self-driving car technology. Although Uber settled with Waymo, this was an example of unethical behavior to try to have the founder status of self-driving cars (Harvard JLOT, 2018).

Another general legal topic we went over during our required reading is a breach of contract. Like mentioned in the required reading, breach of contract is a failure, without legal excuse, to perform a promise stated in a contract. It is categorized as either a material breach or a minor breach. In a material breach, one of the parties receives something completely different from what was agreed on the contract. In a minor breach, the breaching party failed to perform some aspect of the contract. (JEC, n.d.). Uber, unfortunately, is also guilty of breaching a contract. They specifically violated the agreement made with drivers. Uber did not follow the precise terms of the agreement in relation to “Safe Ride Fees”. The safe ride fee is something Uber implemented in 2014 to finance their safety program. The fee for the safety program was to be charged to the customer. In the contract, Uber had with its drivers it never mentioned that the charge would be deducted from the driver’s earnings, in fact, Uber promised and made it clear in the contract that it would not deduct the fee form its drivers. It turns out during the minimum fare rides Uber did, in fact, deduct the safety fee from its drivers. This resulted in a breach of contract (Prysby, n.d.).

Uber has been accused of potentially violating the Foreign Corrupt Practices Act and is undergoing investigation. This Act makes it a criminal offense for any U.S. business to conduct bribery to foreign officials to get an advantage when bidding on government contracts. Even if it acceptable to practice bribery in the foreign country, the FCPA prevents US companies from doing so (Hask-Kelchner, 2006). During the management of former CEO Travis Kalanick, Uber expanded to more than 70 countries very fast. There were instances, like the one in South Korea and France, where Uber violated transportation laws. Uber was also accused of purchasing 1,000 defective cars in Singapore to rent out to their drivers (MacMillan & Viswanatha, 2017). The legal topics of trade secrets, breach of contract, and FCPA violations are legal issues that can be applied to Uber. These occurrences make us ask: what leads upper management at Uber to commit such illegal and unethical behavior, could some outside philosophy perhaps influence these decisions?

Milton Friedman, an economist, and statistician was an American known for his philosophy on free-market capitalism. Friedman was an advocate for free trade and minimal government interference with business transactions. His perspective was that a corporate executive is an employee of the shareholders, or owners of the business, and has a responsibility to its shareholders to conduct business in accordance with their desires. Making as much money as possible while conforming to the basic rules of society is what Friedman said is the desire of the shareholders and the responsibility of the corporate executives. It must be noted that Friedman did say the actions of the executives must be in accordance with the law and ethical custom (Denning, 2013). Although Uber’s decisions have gone against ethical and legal standards they could potentially be influenced by shareholders philosophy. Former CEO Travis Kalanick set to profit as the main priority it seems. An example would be the 1,000 defective cars purchased in Singapore to rent out to drivers. Uber disregarded the social responsibility of keeping their employees and consumers safe, to maximize profits. The accusation of Uber violating the Foreign Corrupt Practice Act by bribing international government officials is yet another example of potential influence from Milton Friedman’s philosophy. Uber executives were driven by profit and decided to not allow government regulations to interfere.

Utilitarianism was introduced in the 18th century. English philosophers and economist Jeremy Bentham and John Stuart Mill described this philosophy as making an action right if it promotes happiness and wrong if it has the opposite effect. Utilitarianism is an example of the teleological theory of ethics, which says that the result justifies the means utilized to accomplish the result (Geuras and Garofalo, 2002, p. 50). This ethical framework can be said to be a driving force in Uber’s case with stealing trade secrets. Their objective was to be the founders of the self-driving vehicle. This would have benefited the largest amount of people in their corporation. Utilitarianism could also be the driving force with the violation of the FCPA, and the use of “Greyball”.

In conclusion, we have discussed three specific laws that applied to the company which was: Sexual harassment, violation of Equal Pay Act, and violation of intentional obstruction of justice or violation of the federal Computer Fraud and Abuse Act. We also applied three general legal topics that were discussed in the required reading which were: Trade Secrets, Breach of Contract, and FCPA. In addition, we discussed Milton Friedman’s philosophy and how it potentially influences executives at Uber. Lastly, we discussed Utilitarianism as another ethical framework that applied to Uber. Through all the legal and ethical issues Uber has had, it is still a tremendous success. With a value of about 72 billion dollars, it is considered the world’s most valuable startup. Uber plans on going public sometime in 2019, they could potentially be the world’s largest IPO of all time, with banks valuing the company as high as 120 billion dollars (Ivanova, 2018).

References

  1. (n.d.). Retrieved from FindLaw: https://corporate.findlaw.com/intellectual-property/patent-law-you-can-use-part-1.html
  2. (n.d.). Retrieved from JEC: http://jec.unm.edu/education/online-training/contract-law-tutorial/breach-of-contract
  3. (2018, March 27). Retrieved from CBS News: https://www.cbsnews.com/news/uber-agrees-to-pay-10-million-to-settle-discrimination-suit/
  4. (2018, March 03). Retrieved from Harvard JLOT: https://jolt.law.harvard.edu/digest/waymo-v-uber-surprise-settlement-five-days-into-trial
  5. Denning, S. (2013, June 26). Retrieved from Forbes: https://www.forbes.com/sites/stevedenning/2013/06/26/the-origin-of-the-worlds-dumbest-idea-milton-friedman/#6b94dfaf870e
  6. EEOC. (n.d.). Retrieved from https://www.eeoc.gov/laws/types/sexual_harassment.cfm
  7. EEOC. (n.d.). Retrieved from https://www.eeoc.gov/laws/types/equalcompensation.cfm
  8. Hartmans, A., & McAlone, N. (2016, August 1). Business Insider. Retrieved from https://www.businessinsider.com/ubers-history
  9. Hask-Kelchner, H. (2006). The business guide to legal literacy: what every manager should know about the law. .
  10. Isaac, M. (2017, February 19). Retrieved from The New York Times: https://www.nytimes.com/2017/02/19/business/uber-sexual-harassment-investigation.html?module=inline
  11. Ivanova, I. (2018, October 16). Retrieved from CBS News: https://www.cbsnews.com/news/uber-ipo-could-value-the-company-at-120-billion-report/
  12. Prysby, N. D. (n.d.). Retrieved from Employment Law Daily: http://www.employmentlawdaily.com/index.php/news/ubers-safe-rides-fee-deduction-breached-driver-agreement-court-certifies-damages-class/
  13. Wakabayashi, D. (2018, May 21). Retrieved from New York Times: https://www.nytimes.com/2018/05/21/technology/uber-sexual-harassment-lawsuit.html
  14. In, S. F. (2017, Mar 04). Uber’s tool of deception; ‘grey ball’ system allows drivers to identify and evade enforcement officials. National Post Retrieved from https://search-proquest-com.ezproxy1.apus.edu/docview/1874145214?accountid=8289
  15. Bershidsky, L. (2017, Nov 30). Uber’s problem: A culture of dishonesty. Chicago Tribune Retrieved from https://search-proquest-com.ezproxy2.apus.edu/docview/1970209904?accountid=8289
  16. MacMillan, D., & Viswanatha, A. (2017, Aug 31). World news: Uber faces probe under U.S. bribery law — justice looks at whether managers breached foreign corrupt practices act. Wall Street Journal Retrieved from https://search-proquest-com.ezproxy2.apus.edu/docview/1933837150?accountid=8289
  17. Geuras, D. and Garofalo, C. (2002). Practical Ethics in Public Administration. Vienna, Virginia: Management Concepts.
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