Unit P Customized by Professor Ludlum December 1, 2016 Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.

Employment is the most common and most important legal relationship. Understanding employer-employee relationship is crucial to understanding the legal environment of business.

Two questions for employees to ask: Is the employer responsible for your actions/torts? 2. Is the employer responsible for your contracts?

Difference between employee and independent contractor? Do not have to pay withholding tax on independent contractors Can you just call yourself and independent contractor?

Distinguish Employee vs. Independent Contractor Relationships. Key: Amount of ____________________ Employer Has Employer Employee Independent Contractor

Control = Responsibility If the employer has control of the worker, The employer has responsibility for the worker’s actions! (torts) Employees are controlled Independent contractors are not controlled

Employer Liability Tort Liability: Employer liable for torts of employee within scope of employment. Employer NOT liable for torts of independent contractors! (no control, no liability) Employer is liable for the intentional torts (battery, fraud) and negligence (car wrecks) of employees.

When does a worker they have ability to contract for the principal? Agent or non-agent Agent has the ability to contract for the principal.

Question: So how does a mentally incompetent person hire a guardian if she lacks capacity to hire a guardian?

Types of Agencies Agency is a fiduciary relationship Difference is way they are created: Agency by Agreement. Agency by Ratification. Agency by Estoppel. Agency by Operation of Law.

Agency By Agreement Formed through express consent (oral or written) or implied by conduct. Can you get me a candy bar? Can you sell my house?

Agency by Ratification Principal either by act or by agreement ratifies ___________________________ conduct of a person who is not in fact an agent.

Ratification 1. Agent must act on behalf of Principal. 2 Ratification 1. Agent must act on behalf of Principal. 2. Principal must affirm _______________.

Agency by Estoppel Principal causes a third person to believe that another person is the Principal’s Agent, and the third person acts to her detriment in reasonable reliance on that belief.

Agency by Operation of Law Agency based on social duty is formed in certain situations when the Agent is unable to contact the Principal. Necessaries. Emergencies.

Agent – Principal Relationship Contract Liability: principal liable for contracts of agents made within their _______________________________________. Agent of State Farm insurance sells you insurance policy Can Agent of State Farm insurance sell you the corporate headquarters?

Power of Attorney – Can do anything the grantor can do Power of Attorney – Can do anything the grantor can do! Prudent to limit their powers so they do not sell your house! Ordinary Durable Useful for long term baby sitters!

Agent & Principal Agent may also be an employee (control and resulting tort liability) Agent may also be an independent contractor (without control and without tort liability)

Agent’s Duties to the Principal: Performance: reasonable diligence and skill Notification to P. Loyalty (no conflict of interest). Obedience. Accounting.

Principal’s Duties to Agent Compensation (Express or Implied). Reimbursement and Indemnification. Cooperation. Provide safe working conditions.

What if . . . Cashier at Bursar’s office is “on the take” Principal’s Rights and Remedies: ___________________________________– money/ property agent steals from Principal. Indemnification.

Discussion Question: Are your parents your agents? Is your spouse your agent? Are your children your agents? Who else serves as your agent?

§ 1: Scope of Agent’s Authority Principal is liable for acts by Agent when Agent either actual or apparent authority:

Apparent Authority Inferred or conferred by custom, or what is reasonably necessary to carry out express authority. Example: Realtor paying for newspaper ad to sell your house

Express Authority Can be oral or written. “________________________________.” If law requires written contract, Agent’s authority must be in writing. Failure to comply with the rule renders contract voidable.

Principals are classified as: Disclosed: Partially Disclosed Undisclosed

Liability Disclosed or partially disclosed: Principal is liable to 3rd party if Agent acts within scope of authority. Agent NOT liable If UNDISCLOSED: Principal and Agent are liable

Liability: Unauthorized Acts Unauthorized acts outside of Agent’s express, implied or apparent authority. If Agent has no authority, Principal is not liable, but Agent is liable. Practical to sue the Agent?

Liability for Agent’s Crimes General Rule: Agent is liable, Principal is not, unless: Principal authorized or participated in crime. Some jurisdictions hold Principal liable for violating statutes.

§ 4: Termination of An Agency Agency can be terminated by: An Act of the Parties; or By Operation of Law. Once agency terminated Agent has no actual authority to bind the Principal, but may have apparent authority to bind Principal.

Termination By Act of the Parties Lapse of Time. Purpose Achieved. Occurrence of a Specific Event. Mutual Agreement. Termination by One Party. Notice of Termination.

Termination By Operation of Law Death or Insanity of either Principal or Agent: automatic. Impossibility. Changed Circumstances. Bankruptcy. War.

Liability for Negligence Applies only to Employer-Employee relationships. Doctrine of Respondeat Superior: Employer is vicariously liable for Employee’s negligent torts committed within the Agent’s “course and scope of employment.” 

Frolic & Detour Cases Departures from the Employer’s Business OLD RULE: To or From the Master’s business Example: Darco Transportation

Examples: Car wreck while at academic conference Walmart night watchman goes to eat

Oklahoma update – Feb 13, 2015 Amanda Carroll v. Capital One Finance, 86 OBAJ 972 Employee fell while returning from lunch at cafeteria. Cafeteria is one floor below the employer’s office. Cafeteria is not owned by the employer.

85 O.S. 2011 § 312.6 Employer not liable for injuries in “areas not under the control of the employer or areas where essential job functions are not performed; provided, however, when the employee is instructed by the employer to perform a work-related task away from the employee’s place of employment, the employee shall be deemed to be in the course of employment. . . Including travel time.

What if Employer had asked her to pick up mail for him while out… Employer had asked her to pick up lunch for him while out…

What if Employee picked up the mail for the employer on her own initiative…

Same rules apply to Borrowed Servants

Liability for Intentional Torts Principal liable for intentional torts committed within the scope of employment. Employee is liable as well. Employer is liable for Employee’s acts, which Employer knew or should have known the Employee had a propensity to commit.

Penn State has paid $90 million to victims (as of 5/2016)