Understanding Agency Relationships and Legal Environment in Business

1. Chapter 19and 20 Agency to Employment BUS 105 PowerPoints by Rick Manzano is licensed under CC-BY 4.0

2. Introduction • Agency=Principal and Agent. • Agency is the most common and most important legal relationship. • Understanding agency is crucial to understanding the legal environment of business.

3. Introduction • Principals use agents to be able to conduct multiple business operations simultaneously in various locations. • The principal has the right to control the agent in matters entrusted to the agent.

4. Employer Employee Independent Contractor § 1: Agency Relationships • Agency is a “fiduciary” relationship based on trust and confidence. • Distinguish Employee vs. Independent Contractor Relationships.

5. Factors: Employee or Independent Contractor Status

6. Employer Liability • Determining whether the worker is an employee or an independent contract affects liability of Principal/Employer. • Tax Liability: Employer liable if employee. • Contract Liability: Employer not necessarily liable. • Tort Liability: Employer liable for torts of employee within scope of employment.

7. §2: Formation of the Agency Relationship • Consensual Agreement. • No consideration required. • Principal needs contractual capacity, Agent does not. • For any legal purpose.

8. Types of Agencies • Agency by Agreement. • Agency by Ratification. • Agency by Estoppel. • Agency by Operation of Law. • Necessaries for family. • Emergency.

9. Agent’s Duties to Principal • Performance: reasonable diligence and skill (special skills). • Notification to P. • Loyalty (no conflict of interest). • Obedience. • Accounting.

10. Principal’s Duties to Agent • Compensation (Express or Implied). • Reimbursement and Indemnification. • Cooperation. • Provide safe working conditions.

11. § 4: Rights and Remedies of Agents and Principals • Rights of Agents: • Right to compensation, reimbursement, indemnification and cooperation. • Agent can withhold performance and demand an accounting. • Agent can recover damages for past services and future damages.

12. Rights and Remedies of Agents and Principals • Principal’s Rights and Remedies: • Contract remedies for breach of fiduciary duty and performance. • Can sue in tort: libel, slander, trespass, deceit, fraud. • Constructive Trust – money/ property agent steals from Principal. • Avoidance of contract if agent does not do as told. • Indemnification

13. § 5: Scope of Agent’s Authority • Principal is liable for acts entered into by Agent when she gives Agent either actual or apparent authority: • Actual Authority: express or implied. • Apparent Authority: estoppel, emergency and ratification.

14. Apparent Authority and Estoppel • Principal, by either word or act, causes 3rd party to reasonably believe that Agent has authority to act for Principal. • If 3rd party changes legal position by relying on Principal’s representations, Principal is estopped from denying Agent had authority to contract.

15. Emergency Powers • Arises when: • Agent should protect Principal. • Agent cannot communicate with Principal.

16. Ratification 1. Agent must act on behalf of Principal. 2. Principal must affirm entire deal. 3. Principal must affirm before 3rd party withdraws from transaction. 4.Principal and 3rd party must have legal capacity to contract when Agent made the deal. 5. Principals must know all the material facts involved in the transaction.

17. §6: Liability for Contracts • Principals are classified as: • Disclosed: identity known to 3rd P. • Partially Disclosed: 3rd P knows he is dealing with Agent, but doesn’t know Principal’s identity. • Undisclosed: 3rd party does not know he is dealing with an Agent, and Principal’s identity is totally unknown.

18. Authorized Acts • Disclosed or partially disclosed Principal is liable to 3rd party if Agent acts within scope of authority. • Agent has no liability to 3rd P for disclosed Principal’s non-performance. (Agent may be liable if Principal is partially disclosed).

19. Liability: Authorized Acts • If undisclosed Principal, no liability unless: • Principal expressly excluded. • Contract is a negotiable instrument. • Agent’s performance is personal. • 3rd party would have contracted if he knew the Principal’s identity.

20. Liability: Unauthorized Acts • Unauthorized acts outside of Agent’s express, implied or apparent authority. • If Agent has no authority, Principal is not liable, but Agent is liable.

21. Actions by E-Agents • An “e-agent” is a semi-autonomous computer program capable of executing specific tasks on behalf of a principal. • E-commerce uses e-agents to create contracts every day.

22. § 7: Liability For Agent’s Torts • Agent is liable to 3rd party for his own torts. • Principal may be liable for Agent’s torts if they result from: • Principal’s own tort. • Principal’s authorization of tort. • Agent’s unauthorized but fraudulent conduct made within scope of agency.

23. Liability for Agent’s Negligence • Applies only to Employer-Employee relationships. • Doctrine of Respondeat Superior: Employer is vicariously liable for Employee’s negligent torts committed within the Agent’s “course and scope of employment.”

24. “Course and Scope of Employment”

25. P Generally Not Liable(unless strict liability) Independent Contractor Outside CSE-P Not Liable Within CSE -P Liable Employee Factors “Course and Scope of Employment” Review: P’s Liability Analysis Worker

26. § 9: Liability for Agent’s Crimes • General Rule: Agent is liable, Principal is not, unless: • Principal authorized or participated in crime. • Some jurisdictions hold Principal liable for violating statutes.

27. Termination of An Agency • Agency can be terminated by: • An Act of the Parties; or • By Operation of Law. • Once agency terminated Agent has no actual authority to bind the Principal, but may have apparent authority to bind Principal.

28. Termination By Act of the Parties • Lapse of Time. • Purpose Achieved. • Occurrence of a Specific Event. • Mutual Agreement. • Termination by One Party. • Notice of Termination.

29. Termination By Operation of Law • Death or Insanity of either Principal or Agent: automatic. • Impossibility. • Changed Circumstances. • Bankruptcy. • War.

30. Employment Relationships

31. Introduction • Historically, employment law was governed by the common law doctrine of “employment at will” where either employer or employee could terminate the relationship at any time, for any reason. • Today employment law is heavily regulated by state and federal statutes.

32. Employment at Will • Traditionally, employment relationships have been by common law doctrine of “employment at will.” • Either party may terminate at any time for any reason. • Exceptions: Contract, Tort, Public Policy.

33. Whistleblowing • Whistleblowing occurs when an employee tells a supervisor or the press that the employer is engaged in some unsafe or illegal activity. • Protection under federal and state law. • Whistleblower Protection Act

34. Lins v. Children’s Discovery Centers of America, Inc. • Supervisor refused to discharge employees who consulted attorneys for workman’s comp. • To do so would be a violation of state law. • Supervisor discharged. • Held illegal retaliation for refusal to violate state law.

35. Wage-Hour Laws • Hours and Wages. • Davis-Bacon Act -- the prevailing wage act. • Employees of contractors and subcontractors on Government jobs. • Walsh-Healey Act -- the beginning of minimum wages. • Contracts with Govt. • Fair Labor Standards Act (FLSA) -- an extension of wage and hour regulation to workers in interstate commerce. • Child Labor. • FLSA prohibits oppressive child labor practices.

36. Worker Health and Safety • The Occupational Safety and Health Act. (OSHA). • The fundamental federal law aimed toward safety in the workplace. • Enforcement is by OSHA, NIOSH, and the OSHRC.

37. State Workers’ Compensation Laws • Reduce employer liability to employees for workplace injuries, and provide a measure of assurance that workplace injuries will be compensated, regardless of the solvency of the employer, by: • Requiring that injured employees make a claim against the employer’s workers’ compensation insurance policy, instead of suing the employer. • Requiring most employers to carry workers’ compensation insurance.

38. Income Security • The primary income security laws are: • Social Security and Welfare. • Private Pension Plans. • Employee Retirement Income Security Act (ERISA) gives employee a vested right to receive pension benefits at a future date when she stops working. • Unemployment Compensation.

39. COBRA • COBRA prohibits the discontinuance of insurance benefits of workers who have voluntarily or involuntarily been separated from work, unless the involuntary separation was on the basis of gross misconduct. • Employers must comply if they have more than 20 employees.

40. Family and Medical Leave Act • The FMLA requires employers with over 50 employees to provide unpaid leave to employees who need to care for a spouse, child, or parent suffering with a serious medical condition. • The employee cannot be terminated for taking leave under the policy, and has the right to restoration to the same or a similar position upon return to work.

41. Employee Privacy Rights • More than 2/3 employers use some sort of electronic monitoring of employees. • Laws Protecting Employee Privacy Rights. • Constitutional and Tort law. • ECPA • Electronic Communications Privacy Act

42. ECPA • Prohibits intentional interception of electronic transmissions. Exceptions: • Device provided in ordinary course of business. • Does not include personal communications. • Employee gives consent.

43. Other Types of Monitoring • Lie Detector Tests. • Prohibited, except under the ongoing investigation exception. • Drug Testing. • Most government employees are subject to testing and the rights of private employees vary from state to state. • AIDS Testing. • Some state statutes restrict AIDS testing.

44. Other Types of Monitoring • Electronic Performance Surveillance. • Most limitations can be avoided if the employer informs employees that surveillance will occur. • Screening Procedures. • Application question must have some reasonable connection to the job sought.

45. Employment-Related Immigration Laws • The Immigration Reform and Control Act prohibits the hiring of illegal aliens. • The Immigration Act of 1990 limits the number of legal immigrants into the U.S. • Form I-9 requires employer to verify the status of each employee.

46. §1: Title VII of theCivil Rights Act of 1964 • Title VII prohibits discrimination in employment on the basis of race, sex, color, religion, and national origin. “Sex” now includes pregnancy. • In addition to prohibiting religious discrimination, employers must reasonably accommodate an employee’s religious practices. • Enforcement of Title VII by EEOC.

47. Gender Discrimination • Two types of sex discrimination: • Differential treatment. • Sexual harassment: • Hostile Work Environment. • Quid Pro Quo. • Employee to Employee

48. Remedies Under Title VII • Liability may be extensive. Plaintiff may receive: • Reinstatement. • Back Pay. • Retroactive Promotions; and • Damages.

49. Equal Pay Act of 1963 • The EPA amends the Fair Labor Standards Act to prohibit gender-based discrimination in wages paid for similar jobs performed under similar conditions. • Pay differentials for jobs with the same or similar jobs can be justified on the basis of seniority, merit, a piece-work system, or any factor other than gender.

50. Age Discrimination • The Age Discrimination in Employment Act (ADEA) protects individuals over the age of 40 from workplace discrimination that favors younger workers.