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Agency
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Employment Relationships
Should the We Fest be liable for an employee’s crime?What factors would you consider? Why?
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“Course and Scope Employment”
Factors For Principal to Be Liable, Agent’s Act must have occurred within the Course and Scope of Employment.
Employer Liable
Employer NOT Liable
Was Employee’s act authorized by Employer? Yes No
The Time place and purpose of act (factually based) ? ?
Was act commonly performed by Employees? Yes No
Did act advance Employer’s interests? Yes No
Did Employer furnish instrumentality (tools)? Yes No
Did Employer have reason to know Employee would do the act?
Yes No
Did the act involve a serious crime? no yes3
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 person’s way to a delivery, he stops and robs a bank.
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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.
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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
Employee vs. Independent Contractor RelationshipFactors Courts Consider: E’ee I.C.
CONTROL? Does the Employer exercise a great degree of control over the details of the work?
Yes No
Same Line of Business? Is the worker engaged in an occupation or business distinct from Employer?
No Yes
Supervised? Is the work usually done under Employer’s supervision? Yes No
Employer Tools? Does Employer provide the tools? Yes No
Long Term Employment? Has the worker been employed a long time?
Yes No
Paid at End? Is the worker paid at the end of the job? No Yes
Degree of Skill? Is there a great degree of skill required? No Yes
Control Key
Factor
What are some other advantages of being an independent contractor? What might be some disadvantages?
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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 doctor’s negligence? Royal Caribbean compares its practice to renting space.
Different Story - Mr. Goodwille. Pronounced dead by ship’s doctor. 8
Employer
Employee IndependentContractor
Facts: • 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 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.
Issue: Graham filed a suit against James, alleging copyright infringement. WHO SHOULD WIN?
© Larry James
Employee v. Independent Contractor – Ownership of Intellectual Property
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End-of-Chapter Question 2, p. 180
IBM working through a licensed re-seller
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There are four ways in which an agency relationship can arise:
Agency Formation
By Agreement
By Estoppel By Operation of Law
By RatificationCoin sale by friend
Gaffrey - Supposed Buyer
Winter – Gaffrey’s “friend”
Borge – Coin Seller
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Group Presentation – Ethical Consideration p. 449Group 4 – On side of hiring contract employeesGroup 5 – On side of it’s not ethical to hire contract employees
Agent’s Duties to the PrincipalPerformance - 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.
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Principal’s Duties to the Agent
Compensation - Except in a gratuitous agency relationship, the principal must pay the agreed-on value for an agent’s 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.
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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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End-of-Chapter Question 8, p. 182
Is Wells Fargo Guard Service liable for unauthorized acts of its agents?
End-of-Chapter Question 5, p. 181
Car accident in company vehicle
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O’Shea 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?
Liability for Employee’s Intentional Torts and Crimes
Principal Liable – if Scope of Employment.– Principal liable for intentional torts committed with the scope of
employment.– Principal’s authorization of the tort
Employee also Liable. Employee is a tortfeasor as well.
Employer Knew or Should Have Known. Employer is liable for Employee’s acts which Employer knew or should have known the Employee had a propensity to commit.
– Did Employee have Employer’s authorization to act?– To what extent were the Employer’s 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.
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Smith v. Sears Roebuck & Co. p. 173Sears employee used job in credit department to run credit checks on her former husband who was behind on support payments.
O’Shea 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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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.
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?
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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
Principal’s 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