Agents and Employees

OBE 118Fall 2004

Professor McKinsey

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.

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.

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

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

Agency by Estoppel

An equitable doctrine founded in fairness• False agency claim by person• Third party believes that person is agent

• Principal acted in way to cause belief

The Duties of Agents

Performance

ObedienceLoyaltyNotification

Accounting

The Duties of Principals

Compensation

Safe Working Conditions

Cooperation

Reimbursement

Indemnification

Authority of Agents

Express

Implied

Apparent

Authority that is customarily associated with agency or necessary for expressly authorized tasks

Agency by estoppel creates authority by estoppel or “apparent” authority

Contract Obligations

Fully Disclosed principal

Undisclosed principal• Agent is directly liable to third party

• Agent is not liable, principal is

• Exception?... Corporation promoters

Torts by Agents (and employees)

Doctrine of respondeat superior

• Authorized time and space

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

• Event caused in part by purpose of principal or employer

• Detour versus Frolic

Classifications of Employees

Employee vs. Independent Contractor

Employee vs. Independent Contractor

Most of the law we are studying as “employment law” applies when a worker is classified as an “employee”

Factors 1) Degree of control and supervision over how and

when work is done2) Same business?3) Skill and tools of employed person?4) Length of period of time for work to be performed?

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.

Classifications of Employees

Employee vs. Independent Contractor

Hourly versus Salary (different compensation rights)

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

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?

Classifications of Employees

Employee vs. Independent Contractor

Hourly versus Salary (different compensation rights)

Public versus Private (diff. employment rights)

At-Will versus Contract (diff. termination rights)

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.

Classifications of Employees

Employee vs. Independent Contractor

Hourly versus Salary (different compensation rights)

Public versus Private (diff. employment rights)

Agency Status (also an agent?)

At-Will versus Contract (diff. termination rights)

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)

Right to Work?The At-will Employment 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

The Right to Unionize

Several laws established the right to unionize

• Clayton Act of 1914• Anti-injunction Act of 1932

• National Labor Relations Act of 1935

Other laws have helped

• Freedom of speech (1940 Supreme Court Case)