CHAPTER 15 – AGENCY

TYPES OF EMPLOYMENT RELATIONSHIPS Employers hire individuals (or other firms) to

allow the employer to accomplish its mission

The primary hiring relationships utilized by an employer include Principal/agent Employer/employee Employer/independent contractor

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TYPES OF EMPLOYMENT RELATIONSHIPS An individual may fit into more than one

hiring category For example, an employer could hire one

individual as an agent, an employee, and an independent contractor

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AN AGENT Agent – A person authorized by another (the

principal) to represent and act for the principal; one authorized to transact business for a principal

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AN EMPLOYEE Employee – A person in the service of an

employer, where the employer has the power to control and direct the employee in the details of how the work is to be done

An employee does not represent an employer

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AN INDEPENDENT CONTRACTOR Independent Contractor – A person who

contracts to do a piece of work according to the independent contractor’s own methods, subject to the employer’s control only as to the end product or final result of the work

An independent contractor does not represent an employer

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EMPLOYEE & INDEPENDENT CONTRACTOR FORMATION Generally, the employer/employee and the

employer/independent contractor relationships is formed by Agreement (contract)

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EMPLOYER LIABILITY FOR CONTRACTS The employer is liable for contracts entered

into by agents, if the agents have actual or apparent authority, or if the employer ratifies the contract

Actual authority includes express authority (exact wording when agent hired) and implied authority (inferred from express authority)

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EMPLOYER LIABILITY FOR CONTRACTS The employer is not liable for contracts

entered into by employees or independent contractors, unless the employer ratifies the contracts

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DUTIES OF AGENTS TO PRINCIPALS An agent is a fiduciary for the principal and is

obligated under the following duties to the principal Performance of duties in the contract Loyalty Obedience Accounting Notification

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DUTIES OF PRINCIPALS TO AGENTS The principal is obligated under the following

contractual duties to the agent Duty of compensation Duty of reimbursement Duty of cooperation Duty to provide safe working conditions

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EMPLOYER LIABILITY FOR TORTS An employer is generally not liable for the

torts of independent contractors

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ENDING THE EMPLOYMENT RELATIONSHIP (CHAPTER 20)

Employment at will (EAW) EAW is a doctrine which provides that a

contract of employment for an indefinite term is terminable at the will of either party

Under EAW, an at‑will employee may be discharged for good cause, no cause, or even a morally wrong cause

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ENDING THE EMPLOYMENT RELATIONSHIP (CHAPTER 21)

Exceptions to employment at will Federal civil rights laws, for example,

protections against discharge based on age, race, gender, disability, religion, national origin, or color

State laws that protect against discharge that breaches a contractual promise of employment, or discharge that violates public policy

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