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Agents and Employees
OBE 118Fall 2004
Professor McKinsey
The first step in understanding employment law is understanding what an agent is. Agency law also complements our understanding of both contract law and the laws of business organizations.
Agent versus Employee?
As we study agency, keep in mind that an employee might or might not be an agent.
As we study employment law we will compare employees to independent contractors.
Independent contractors might also, or might not be, agents.
Agents• An Agent is an authorized representative who has the
authority to make decisions or create obligations for someone else who is called the Principal– Cashiers
– Managers
– Buyers and sellers
• The key to correctly identifying agents is often to look for the authority they are given or have.– Authority should be rooted in transactions or obligations
Creating Agency Relationships
Agency by Agreement (express agency)– Mutual agreement, agency rooted in contract law
Agency by Ratification (after-the-fact agency)– A principal can agree to accept the decision a person made
supposedly on their behalf.
Agency by Estoppel (implied agency)– A principal can be estopped from denying an agency
relationship because of behavior and treatment consistent with agency
Agency by Estoppel
An equitable doctrine founded in fairness• False agency claim by person• Third party believes that person is agent
• Principal acted in way to cause belief
The Duties of Agents
Performance
ObedienceLoyaltyNotification
Accounting
The Duties of Principals
Compensation
Safe Working Conditions
Cooperation
Reimbursement
Indemnification
Authority of Agents
Express
Implied
Apparent
Authority that is customarily associated with agency or necessary for expressly authorized tasks
Agency by estoppel creates authority by estoppel or “apparent” authority
Contract Obligations
Fully Disclosed principal
Undisclosed principal• Agent is directly liable to third party
• Agent is not liable, principal is
• Exception?... Corporation promoters
Torts by Agents (and employees)
Doctrine of respondeat superior
• Authorized time and space
Wrongful acts of an employee or agent on the job and within the scope of employment create liability for the principal or employer
• Authorized type of work
• Event caused in part by purpose of principal or employer
• Detour versus Frolic
Classifications of Employees
Employee vs. Independent Contractor
Employee vs. Independent Contractor
Most of the law we are studying as “employment law” applies when a worker is classified as an “employee”
Factors 1) Degree of control and supervision over how and
when work is done2) Same business?3) Skill and tools of employed person?4) Length of period of time for work to be performed?
Independent Contractors
• Relationship mostly governed by contract law and perhaps also agency law, not employment law.
• No required unemployment, social security taxes etc. Thus, less costly for employers. But employers loses a degree of control.
Classifications of Employees
Employee vs. Independent Contractor
Hourly versus Salary (different compensation rights)
Hourly versus Salaried
• Salaried employees are those employees “exempt” from some provisions of the wage-hour laws (such as overtime)
• Category of an employee is a complex question, is industry specific and job specific.
• The desire of an employer, or the official title or classification given the employee usually has little importance in deciding whether an employee is salaried or hourly
Factors that Help Determine Salaried Status
• Is employee pay mostly unrelated to amount (hours) of work?– Is employee pay reduced for late arrival?– Is employee pay reduced for missing a significant part
of a day?– Is employee pay reduced for missing a day?
• Does employee have managerial, executive, or professional tasks and responsibilities?
• Does employee have a high degree of independence?
Classifications of Employees
Employee vs. Independent Contractor
Hourly versus Salary (different compensation rights)
Public versus Private (diff. employment rights)
At-Will versus Contract (diff. termination rights)
At-Will versus Contract Employees
• An “at-will” employee can be terminated at any time for “any” reason
• Even if an employee is called an “at-will” employee, however, there are various things that an employer can do that could create some degree of protection against termination.
Classifications of Employees
Employee vs. Independent Contractor
Hourly versus Salary (different compensation rights)
Public versus Private (diff. employment rights)
Agency Status (also an agent?)
At-Will versus Contract (diff. termination rights)
Some Basic Employee Rights• Worker’s Compensation:• Wage-Hour Laws
– Salaried versus Hourly distinction important here
– Right to owed compensation
• ERISA (Employee Retirement Income Security Act)
• OSHA- Safe work environment• Labor Laws- right to engage in organized labor
activities (more on this in a minute)• FMLA- 12 weeks unpaid leave for family matters
(6 paid weeks in California as of July 1, 2004)
Right to Work?The At-will Employment versus Wrongful
Discharge paradox
At-will employees can be fired for “any reason”
except:– Public Policy – Implied Contracts– Covenant of Good Faith and Fair Dealing
The Right to Unionize
Several laws established the right to unionize
• Clayton Act of 1914• Anti-injunction Act of 1932
• National Labor Relations Act of 1935
Other laws have helped
• Freedom of speech (1940 Supreme Court Case)