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
 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
Notification
Loyalty
Obedience
Accounting
 The Duties of Principals
Compensation
Cooperation
Safe Working Conditions
Reimbursement
Indemnification
 Authority of Agents
Express
Implied
Authority that is customarily associated with
agency or necessary for expressly authorized
tasks
Apparent
Agency by estoppel creates authority by estoppel
or “apparent” authority
 Contract Obligations
Fully Disclosed principal
• Agent is not liable, principal is
• Exception?... Corporation promoters

Undisclosed principal
• Agent is directly liable to third party
Torts by Agents (and employees)

Doctrine of respondeat superior

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

• Authorized time and space
• 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 done
2) 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)
At-Will versus Contract (diff. termination rights)
Agency Status (also an agent?)
 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
• Anti-injunction Act of 1932
• Clayton Act of 1914
• National Labor Relations Act of 1935
Other laws have helped
• Freedom of speech (1940 Supreme Court Case)