Chapter 18 Management of Employee Conduct: Agency

1. MARIANNE M. JENNINGS Its Legal, Ethical, and Global Environment 7th Ed. Chapter 18Management of Employee Conduct: Agency

2. Terminology • Nature of Agency: Agency relationship is one in which one party agrees to act on behalf of another. • Examples: sales clerks, real estate agents, sports agents. • Agent: Party who acts for another. • Principal: The party for whom the agent acts.

3. Terminology • Master/Servant: • Relationship in which the master/principal exercises a great deal of control over the servant/ agent. Most common form is employer/employee relationship. • Factors that control whether this type of relationship exists: • Level of supervision. • Level of control. • Regularity of hours and pay. • Length of employment.

4. Terminology • Independent contractor: • Hired to perform a task but is not directly supervised. Example: Lawyer. • Agency Law: Restatement of Agency. • Common law followed by most courts.

5. Terminology • Three Parts to Agency Law: • Creating the agency relationship. • Relationship between principal and agent. • Relationships of agent and principal to third parties.

6. Agency Creation • Creating the Agency Relationship: when the principal hires someone. • Express Authority Agency. • Created by principal stating or writing that agency exists and the authority thereof. • Requires oral or written agreement - must be in writing if required by statute of frauds. • Example: Agency contract is longer than one year.

7. Agency Creation • The Writing. • If the agent’s contracts must be in writing, the authority must be in writing. • Principal Must Have Legal Capacity. • Age and mental capacity.

8. Agency Creation • Capacity: unincorporated associations do not have capacity: • Have no legal existence. • Members will be liable since there is no principal. • The capacity of agent becomes an issue when it concerns: • Authority to enter contracts. • Potential liability to third parties.

9. Agency Creation • Implied Authority: the extension of express authority by custom. • Apparent Authority: • Arises from the way agents present themselves to third parties. • Also called agency by estoppel or ostensible authority. • Examples: Failure to notify of an agent’s retirement, allowing bank to use your name for another’s loan.

10. Apparent Authority • Case 18.1Montoya v. Grease Monkey Holding Corp. (1995). • What was the apparent authority Sensenig had? • What representations were made to Montoya? • Is this apparent or actual authority?

11. Agency Creation • Agency by Ratification. • Principal reviews contract and decides to honor it even though agent had no authority to enter into it. • Fiduciary Relationship. • Agent acts in the principal’s best interests. • Loyalty, trust, care, obedience. • Loyalty. • Agent can’t represent both sides. • Can’t make a profit at principal’s expense.

12. Fiduciary Duties • Case 18.2Silva v. Bisbee(1981). • What did agent Bisbee fail to disclose? • Was agent Bisbee representing both sides in a transaction? • Why is Midkiff also liable?

13. Loyalty: Covenants • Case 18.3Coady v. Harpo, Inc. (1999). • What did Ms. Coady agree to at the time of employment? • Is there a difference between a confidentiality agreement and covenant not to compete? • Was the Oprah covenant enforceable?

14. Rights and Duties • Agent: Obedience. • Follows principal’s instructions . • Need not do anything illegal. • Agent: Duty of care. • Give time and effort. • Follow through. • Principal: Duties and Rights. • Duty to pay -- Except gratuitous agency. • Duty to reimburse.

15. Principal’s Liability • Principal’s Liability to Third Parties. • Contract liability and issues of disclosure. • Principal has full liability for authorized acts of agent and those done with apparent authority. • Disclosed principal—principal is fully liable; agent is not unless the agent had no authority.

16. Principal’s Liability • Contract liability and issues of disclosure. • Partially disclosed principal—agent indicates there is a principal but does not tell who it is; third party can hold either liable • Undisclosed principal—agent does not disclose there is a principal; agent stands alone unless principal comes forward

17. Principal’s Liability • Liability of Principals for torts. • Must have master-servant relationship, not independent contractor. • Liable for torts of servants in scope of employment. • Scope = doing master’s work. • Doctrine of respondeat superior-let the master answer. • Not liable for torts committed while on frolic.

18. Scope of Employment • Case 18.4Faverty v. McDonald’s Restaurant of Oregon, Inc.(1995) • Why would a restaurant association have an interest in the outcome of the case? • Case 18.5Lange v. National Biscuit Co.(1973) • What test does the court give for determining scope of employment?

19. Negligent Hiring • Case 18.6Doe v. Norwich Roman Catholic Diocesan Corp. (2003). • Does respondeat superior apply here? • Why is negligent hiring an issue in this case? • What must the plaintiff prove to recover against the church?

20. Principal’s Liability • Principles are generally not liable for the torts of Independent Contractors. • Exceptions: • Inherently dangerous activities. • Negligent hiring of independent contractor. • Principal provided specifications for project or Job.

21. Agency Termination • Due to: • Definite duration of time. • Agent quits/is fired. • Principal dies/is incapacitated. • Need to give public or constructive notice (trade publication). • Actual notice (letters). • Without notice, agent will have lingering apparent authority.

22. Termination of At-Will • Has no definite ending date. • Usually there is no formal written contract. • Used to be they could be fired at any time.

23. Termination of At-Will • The Do’s and Don’ts of Firing At-Will Employees. • Do: • Conduct regular reviews of employees, using objective, uniform measures of performance. • Don't • Make oral promises of job security to employees who might later be laid off. • Danger: Breach of contract suit.

24. Termination of At-Will • The Do’s and Don’ts of Firing At-Will Employees. • Do: Give clear, business-related reasons for any dismissal, backed by written documentation when possible. • Don't: Put pressure on an employee to resign in order to avoid getting fired. • Danger: Coercion suit.

25. Termination of At-Will • Do: • Seek legal waivers from older workers who agree to leave under an early-retirement plan, and make sure they understand the waiver terms in advance. • Don't: • Make derogatory remarks about any dismissed worker, even if asked for a reference by a prospective employer. • Danger: Defamation suit.

26. Termination of At-Will • Do: • Follow any written company guidelines for termination, or be prepared to show in court why they're not binding in any particular instance. • Don't: • Offer a fired employee a face-saving reason for the dismissal that's unrelated to poor performance. • Danger: Wrongful discharge suit.

27. Termination of At-Will • The Implied Contract • In some states personnel manuals will be a contract if employees rely on its procedures. • Case 18.7Dillon v. Champion Jogbra, Inc. (2002).

28. Public Policy • The Public Policy Protection—Whistle-Blowers: • Whistle Blower Protection Act of 1978. • False Claims Act. • Protection for Whistle-Blowers—The Anti-retaliation Statutes. • Passed in many states and by federal agencies. • Prohibit firing, demotion, reprimands, and pay cuts of employees who report conduct of their employers.

29. Public Policy • Protection for Whistle-Blowers—The Anti-retaliation Statutes. • Federal level—Energy Reorganization Act affords protection for employees involved in nuclear work. • Whistle-Blowing for Both Employers and Employees. • Many companies have created a peer review process for termination and other actions against employees.

30. Public Policy • Case 18.8Gardner v. Loomis Armored, Inc.(1996). • Does this case create an affirmative legal duty for helping those in danger? • Can an employee in Washington be fired for assisting a citizen who is a crime victim?

31. International Law • Pitfalls of Complex Global Organizations. • Complex interrelationships often evade the law. Example: BCCI and its complex structure. • Disclosure of interrelationships becomes important for conflicts, compliance.