Chapter 18 Management Of Employee Conduct: Agency

1. Chapter 18Management Of Employee Conduct: Agency

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

6. Creation of the Agency Relationship • Creating the Agency Relationship • Created 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. Creation of the Agency Relationship • The Writing • If the agent’s contracts must be in writing, the authority must be in writing • Requirement of Capacity • Principal must have capacity • Age and mental capacity

8. Creation of the Agency Relationship • Requirement of Capacity • Unincorporated associations do not have capacity • Have no legal existence • Members will be liable since there is no principal • When the capacity of agent becomes an issue • Not an issue when it concerns authority to enter contracts • Is an issue when it concerns potential liability to third parties

9. Creation of the Agency Relationship • 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. Creation of the Agency Relationship • Case 18.1 Streetman v. Benchmark Bank (1995) • What did the Streetmans say that Watts promised them? • Would Watts have the authority to make that promise?

11. Creation of the Agency Relationship • 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. The Principal-Agent Relationship • Case 18.2 Silva 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. The Principal-Agent Relationship • Case 18.3 Coady 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. The Principal-Agent Relationship • Obedience • Follows principal’s instructions • Need not do anything illegal • Duty of care • Give time and effort • Follow through • Principal’s Duties and Rights • Duty to pay -- Except gratuitous agency • Duty to reimburse

15. Liability of Principals for Agents’ Conduct • The Relationship With 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 • 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

16. Liability of Principals for Agents’ Conduct • The Relationship With Third Parties • 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

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

18. Liability of Principals for Agents’ Conduct • 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

19. Termination of theAgency Relationship • Ending an Agency Relationship • Definite duration of time • Agent quits/is fired • Principal dies/is incapacitated • Need to give public or constructive notice (trade publication) • Also give actual notice (letters) • Without notice, agent will have lingering apparent authority

20. Termination of Agents Under Employment at Will • Meaning of Employment at Will • Has no definite ending date • Usually there is no formal written contract • Used to be they could be fired at any time • Courts now afford some protection

21. Termination of Agents Under Employment at Will • The Do’s and Don’ts of Firing 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

22. Termination of Agents Under Employment at Will • The Do’s and Don’ts of Firing 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

23. Termination of Agents Under Employment at Will • The Do’s and Don’ts of Firing Employees • 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

24. Termination of Agents Under Employment at Will • The Do’s and Don’ts of Firing Employees • 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

25. Termination of Agents Under Employment at Will • The Implied Contract • In some states personnel manuals will be a contract if employees rely on its procedures

26. Termination of Agents Under Employment at Will • Case 18.6 Guz v. Bechtel (2000) • Is Guz correct that implied contract rights override legitimate business reasons? • What does Guz say is the relationship between good performance and the employer’s right to terminate employees at will?

27. Termination of Agents Under Employment at Will • 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

28. Termination of Agents Under Employment at Will • 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

29. Termination of Agents Under Employment at Will • Case 18.7 Gardner 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?

30. Agency Relationships in 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