Agents and Employees

1. Agents and Employees 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. OBE 118 Fall 2004 Professor McKinsey

2. 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.

3. 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

4. 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

5. Agency by Estoppel • False agency claim by person • Third party believes that person is agent • Principal acted in way to cause belief An equitable doctrine founded in fairness

6. The Duties of Agents Notification Loyalty Obedience Performance Accounting

7. The Duties of Principals Cooperation Safe Working Conditions Reimbursement Compensation Indemnification

8. Authority of Agents Implied Authority that is customarily associated with agency or necessary for expressly authorized tasks Express Apparent Agency by estoppel creates authority by estoppel or “apparent” authority

9. Contract Obligations • Agent is not liable, principal is • Exception?... Corporation promoters Undisclosed principal Fully Disclosed principal • Agent is directly liable to third party

10. Torts by Agents (and employees) 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 Doctrine of respondeat superior • Authorized time and space • Event caused in part by purpose of principal or employer • Detour versus Frolic

11. Classifications of Employees Employee vs. Independent Contractor

12. Employee vs. Independent Contractor Factors Most of the law we are studying as “employment law” applies when a worker is classified as an “employee” 1) Degree of control and supervision over how and when work is done 2) Same business? 3) Skill and tools of employed person? 4) Length of period of time for work to be performed?

13. 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.

14. Classifications of Employees Hourly versus Salary (different compensation rights) Employee vs. Independent Contractor

15. 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

16. 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?

17. Classifications of Employees Hourly versus Salary (different compensation rights) Public versus Private (diff. employment rights) At-Will versus Contract (diff. termination rights) Employee vs. Independent Contractor

18. 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.

19. Classifications of Employees Hourly versus Salary (different compensation rights) Public versus Private (diff. employment rights) At-Will versus Contract (diff. termination rights) Employee vs. Independent Contractor Agency Status (also an agent?)

20. 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)

21. Right to Work? The At-willEmployment 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

22. The Right to Unionize • Anti-injunction Act of 1932 • Clayton Act of 1914 • National Labor Relations Act of 1935 Several laws established the right to unionize Other laws have helped • Freedom of speech (1940 Supreme Court Case)