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Agency 1

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Employment Relationships Should the We Fest be liable for an employees crime? What factors would you consider? Why? 2

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Course and Scope Employment Factors For Principal to Be Liable, Agents Act must have occurred within the Course and Scope of Employment. Employer Liable Employer NOT Liable Was Employees act authorized by Employer? YesNo The Time place and purpose of act (factually based) ?? Was act commonly performed by Employees? YesNo Did act advance Employers interests? YesNo Did Employer furnish instrumentality (tools)? YesNo Did Employer have reason to know Employee would do the act? YesNo Did the act involve a serious crime? noyes 3

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Examples Start Job Early. Steve hires Joey to mow lawns for his lawn mowing service and tells him not to start before 7:00 am. Joey starts at 6:00 am and injures someone. Did Joey act within the scope of employment. Janitor Puts Glass Shards in Wall. Apartment manager hires a new janitor to maintain building and kids bother him. He boss tells him to let it go and he puts glass shards in the wall the kids climb over to get into the apartment complex in an attempt to keep them out. Did he act within scope of employment? The janitor singles out one kid and beats him up. Delivery Person Robs Bank. You hire a delivery person and on the delivery persons way to a delivery, he stops and robs a bank. 4

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Agency Relationships Principal and Agent = Agency (most common legal relationship) Employee/Employer Relationship Principal/Independent Contractor Relationship Agent acts for principal. (Employee is an agent for the principal.) Enables principal to operate in multiple locations. 5

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6 Fiduciary Duty. Agent Owes Fiduciary Duty to Principal: Loyalty and Care. Duty of Loyalty and Care: an agent has a duty to act solely for the benefit of his or her principal in all matters directly related with the agency undertaking. When is it an Agency? Sometimes it is not clear when an agency relationship is created between and independent contractor and its employer (client). CASE 5.2 EBC 1, Inc. v. Goldman, Sachs & Co. (2005). Advice to a client by underwriters on market conditions creates a fiduciary duty. Goldman helped set price at $20 shares jumped to $85 and closed at $75 on the first day. Goldman got kickbacks of profits made to initial buyers. Case 5,1, Neinhard v. Salmon. Fiduciary Duty

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Employee vs. Independent Contractor Relationship Factors Courts Consider: EeeI.C. CONTROL? Does the Employer exercise a great degree of control over the details of the work? YesNo Same Line of Business? Is the worker engaged in an occupation or business distinct from Employer? NoYes Supervised? Is the work usually done under Employers supervision? YesNo Employer Tools? Does Employer provide the tools? YesNo Long Term Employment? Has the worker been employed a long time? YesNo Paid at End? Is the worker paid at the end of the job? NoYes Degree of Skill? Is there a great degree of skill required? NoYes Control Key Factor What are some other advantages of being an independent contractor? What might be some disadvantages? 7

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Cruise Ship Doctors Independent Contractors? Facts: Hit Head on Cruise. Janice Sullivan slipped and hit her head on a Royal Caribbean cruise celebrating her wedding anniversary. Doctor Failed to Treat. The ship doctor, wearing a crew uniform, gave her over-the-counter pain medicine but did not scan or X-ray her despite pain over the next few days. Serious Blood Clot. When she got home she went to the emergency room and discovered the truth. Issue: Is Royal Caribbean Liable for the doctors negligence? Issue: Should Royal Caribbean have to pay for the doctors negligence? Royal Caribbean compares its practice to renting space. Different Story - Mr. Goodwille. Pronounced dead by ships doctor. 8

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Employer Employee Independent Contractor Facts: Graham Sells freeware Software. Richard Graham marketed CD-ROM disks containing compilations of shareware, freeware, and public domain software.Graham Sells freeware Software. Richard Graham marketed CD-ROM disks containing compilations of shareware, freeware, and public domain software. James wrote a software program for Graham. Larry James agreed to create a program for him in exchange for credit on the final product. James built into the program a notice attributing authorship and copyright to himself.James wrote a software program for Graham. Larry James agreed to create a program for him in exchange for credit on the final product. James built into the program a notice attributing authorship and copyright to himself. James wanted credit - Graham removed the notice., claiming that the program was a work for hire and the copyright was his.James wanted credit - Graham removed the notice., claiming that the program was a work for hire and the copyright was his. James sold the program to another CD-ROM publisher.James sold the program to another CD-ROM publisher. Issue: Graham filed a suit against James, alleging copyright infringement. WHO SHOULD WIN? Larry James Employee v. Independent Contractor Ownership of Intellectual Property 9

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End-of-Chapter Question 2, p. 180 IBM working through a licensed re-seller 10

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There are four ways in which an agency relationship can arise: Agency Formation By Agreement By EstoppelBy Operation of Law By Ratification Coin sale by friend Gaffrey - Supposed Buyer Winter Gaffreys friend Borge Coin Seller 11

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12 Group Presentation Ethical Consideration p. 449 Group 4 On side of hiring contract employees Group 5 On side of its not ethical to hire contract employees

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Agents Duties to the Principal Performance - The agent must use reasonable diligence and skill in performing his or her duties. Notification - The agent is required to notify the principal of all matters that come to his or her attention concerning the subject matter of the agency. Loyalty - The agent has a duty to act solely for the benefit of his or her principal and not in the interest of the agent or a third party. Obedience - The agent must follow all lawful and clearly stated instructions of the principal. Accounting - The agent has a duty to make available to the principal records of all property and money received and paid out on behalf of the principal. 13

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Principals Duties to the Agent Compensation - Except in a gratuitous agency relationship, the principal must pay the agreed-on value for an agents services. Reimbursement and indemnification - This principal must reimburse the agent for all sums of money disbursed at the request of the principal and for all sums of money the agent disburses for necessary expenses in the course of reasonable performance of his or her agency duties. Cooperation - A principal must cooperate with and assist an agent in performing his or her duties. Safe working conditions - A principal must provide safe working conditions for the agent-employee. 14

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15 Actual Authority: principal gives consent for the agent to act for and bind the principal. Consent is express or implied. Apparent Authority: when a third party reasonably believes the agent has authority to act for and bind the principal. CASE 5.3 Powell v. MVE Holdings, Inc. (2001). CEO has apparent authority to enter into contracts with former employee. - told Powell, former president, that company would buy back his shares at same price others got ($125/share now worth $5/share). Agent s Ability To Bind The Principal to Contracts

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16 End-of-Chapter Question 8, p. 182 Is Wells Fargo Guard Service liable for unauthorized acts of its agents?

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End-of-Chapter Question 5, p. 181 Car accident in company vehicle 17 OShea v. Welch, p. 169. Turning into a service station to get estimate for repair on a personal car what was the result in this case?

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Liability for Employees Intentional Torts and Crimes Principal Liable if Scope of Employment. Principal liable for intentional torts committed with the scope of employment. Principals authorization of the tort Employee also Liable. Employee is a tortfeasor as well. Employer Knew or Should Have Known. Employer is liable for Employees acts which Employer knew or should have known the Employee had a propensity to commit. Did Employee have Employers authorization to act? To what extent were the Employers interests advanced? Did the Employer provide the instrumentality that caused the injury? Did the Employer have knowledge that the Employee would perform the act? Crimes. General Rule: Agent is liable, Principal is not, unless: Principal authorized or participated in crime. 18 Smith v. Sears Roebuck & Co. p. 173 Sears employee used job in credit department to run credit checks on her former husband who was behind on support payments. OShea v. Welch, p. 169 Employee made a left hand turn to do a personal errand while otherwise working. Is the employer liable?

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19 Liability for Torts of Agent Liability for Torts Outside the Scope of Employment. Respondeat superior generally only applies to actions of employees not independent contractors.

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Torts by Independent Contractors As a general rule, an employer is not liable for the torts committed by the independent contractor. This rule is riddled with many exceptions, and these exceptions come in many forms, such as hazardous activities. Have the exceptions become the rule? What policy interest is furthered by imposing liability on employers for the torts of their independent contractors? 20

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Liability for Authorized Acts Disclosed or Partially Disclosed. 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 Principals non-performance. (Agent may be liable if Principal is partially disclosed). Undisclosed Principal, Agent is liable Principal also liable Principal can enforce contract against the third party. 21