CHAPTER 19 – AGENCY

Copyright © 2011 by Jeffrey Pittman

TYPES OF EMPLOYMENT RELATIONSHIPS

Employers hire individuals (or other firms) to allow the employer to accomplish its mission

The primary hiring relationships utilized by an employer include Principal/agent Employer/employee Employer/independent contractor

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TYPES OF EMPLOYMENT RELATIONSHIPS An individual may fit into more than one

hiring category For example, an employer could hire one

individual as an agent, an employee, and an independent contractor

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AN AGENT

Agent – A person authorized by another (the principal) to represent and act for the principal; one authorized to transact business for a principal

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AN EMPLOYEE

Employee – A person in the service of an employer, where the employer has the power to control and direct the employee in the details of how the work is to be done

An employee does not represent an employer

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AN INDEPENDENT CONTRACTOR

Independent Contractor – A person who contracts to do a piece of work according to the independent contractor’s own methods, subject to the employer’s control only as to the end product or final result of the work

An independent contractor does not represent an employer

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AGENCY FORMATION

The principal/agent relationship can be formed by: Agreement (contract) Ratification (silence by principal after learning all

material facts) Estoppel (principal leads third person to believe

another person is the principal’s agent) Operation of Law

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EMPLOYEE & INDEPENDENT CONTRACTOR FORMATION

Generally, the employer/employee and the employer/independent contractor relationships is formed by Agreement (contract)

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EMPLOYER LIABILITY FOR CONTRACTS

The employer is liable for contracts entered into by agents, if the agents have actual or apparent authority, or if the employer ratifies the contract

Actual authority includes express authority (exact wording when agent hired) and implied authority (inferred from express authority)

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EMPLOYER LIABILITY FOR CONTRACTS

Apparent authority is present where actual authority is lacking, but the principal has misled third parties into believing that actual authority exists

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EMPLOYER LIABILITY FOR CONTRACTS

The employer is not liable for contracts entered into by employees or independent contractors, unless the employer ratifies the contracts

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DUTIES OF AGENTS TO PRINCIPALS

An agent is a fiduciary for the principal and is obligated under the following duties to the principal Performance of duties in the contract Loyalty Obedience Accounting Notification

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DUTIES OF PRINCIPALS TO AGENTS The principal is obligated under the following

contractual duties to the agent Duty of compensation Duty of reimbursement and indemnification Duty of cooperation Duty to provide safe working conditions

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EMPLOYER LIABILITY FOR TORTS

Under the doctrine of respondeat superior, an employer is liable for the torts of agents or employees where the torts are committed within the scope of employment

An employer is generally not liable for the torts of independent contractors

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“SCOPE OF THE JOB”

A simplified approach to determining if an agent or employee has committed a tort within the scope of the job is to ask: How much potential control did the employer

have over the situation, and How closely connected was the tort to the job

duties?

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CRITERIA FOR DETERMINING WHETHER SOMEONE IS AN INDEPENDENT CONTRACTOR

The most important criterion for determining an independent contractor versus an employee is the extent of employer control over details of the work – the more control, the more likely the individual is an employee

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CRITERIA FOR DETERMINING WHETHER SOMEONE IS AN INDEPENDENT CONTRACTOR

Other determining factors include: Type of job (some jobs are usually done by either

an employee or an independent contractor) Who supplies equipment or tools (employers

usually furnish tools for employees but not independent contractors)

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CRITERIA FOR DETERMINING WHETHER SOMEONE IS AN INDEPENDENT CONTRACTOR

Other determining factors include: Amount of skill required to perform job (higher skill

jobs may require independent contractors) Length of employment (employees usually are

longer term hires than independent contractors) Method of payment (employees are usually hourly

or salary; independent contractors are often paid by the job)

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SCOPE OF AUTHORITY

Ermoian v. Desert Hospital illustrates the doctrine of respondeat superior as applied to employees versus independent contractors, and the question agency by estoppel

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ERMOIAN V. DESERT HOSPITAL

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ENDING THE EMPLOYMENT RELATIONSHIP (CHAPTER 20)

Employment at will (EAW) EAW is a doctrine which provides that a

contract of employment for an indefinite term is terminable at the will of either party

Under EAW, an at‑will employee may be discharged for good cause, no cause, or even a morally wrong cause

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ENDING THE EMPLOYMENT RELATIONSHIP (CHAPTER 21)

Exceptions to employment at will Federal civil rights laws, for example,

protections against discharge based on age, race, gender, disability, religion, national origin, or color

State laws that protect against discharge that breaches a contractual promise of employment, or discharge that violates public policy

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