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

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

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

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

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

6. 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

7. 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.

8. 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.

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

10. 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.

11. 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?

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

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

14. 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.

15. 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.

16. 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?

17. 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!

18. 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)

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

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

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

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

23. § 1: Scope of Agent’s Authority
Principal is liable for acts by Agent when Agent either actual or apparent authority:

24. 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

25. 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.

26. Principals are classified as:
Disclosed:
Partially Disclosed
Undisclosed

27. 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

28. 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?

29. 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.

30. § 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.

31. 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.

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

33. 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.” 

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

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

36. 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.

37. 85 O.S § 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.

38. 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…

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

40. Same rules apply to Borrowed Servants

41. 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.

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