1. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved Slides developed by Les Wiletzky PowerPoint Slides to Accompany ESSENTIALS OF BUSINESS AND ONLINE COMMERCE LAW 1 st Edition by Henry R. Cheeseman Chapter 19 Agency and Employment Chapter 19 Agency and Employment

2. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 2 Agency (1 of 2) principalagent  Agency relationships are formed by the mutual consent of a principal and an agent fiduciary relationship  Agency is the fiduciary relationship “which results from the manifestation of consent by one person to another that the other shall act in his behalf and subject to his control, and consent by the other so to act.”

3. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 3 Agency (2 of 2)  Agency Law  Agency Law – The large body of common law that governs agency A mixture of contract law and tort law  Principal  Principal – The party who employs another person to act on his or her behalf  Agent  Agent – The party who agrees to act on behalf of another

4. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 4 Principal-Agent Relationship (1 of 2) Principal Agent Third Party Agency Contract Contract with third party on behalf of principal Principal’s obligation to perform the contract

5. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 5 Principal-Agent Relationship (2 of 2)  An employer hires an employee and gives that employee authority to act and enter into contracts on his or her behalf  The extent of this authority is governed by any express agreement between the parties and implied from the circumstances of the agency

6. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 6 Express Agency  An agency that occurs when a principal and an agent expressly agree to enter into an agency agreement with each other Exclusive agency contract Power of attorney  Express agency contracts can be either oral or written unless the Statute of Frauds stipulates that they must be written

7. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 7 Implied Agency  An agency that occurs when a principal and an agent do not expressly create an agency  The agency is implied from the conduct of the parties  The extent of the agent’s authority is determined from the particular facts and circumstances of the particular situation Incidental authority

8. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 8 Apparent Agency  Agency that arises when a principal creates the appearance of an agency that in actuality does not exist estopped  When an apparent agency is established, the principal is estopped from denying the agency relationship  It is the principal’s actions (not the agent’s) that create an apparent agency

9. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 9 Agency by Ratification An agency that occurs when: 1.A person misrepresents himself or herself as another’s agent when in fact he or she is not, and 2.The purported principal ratifies (accepts) the unauthorized act

10. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 10 Summary: Formation of Agency Relationships (1 of 2) Type of Agency DefinitionEnforcement of the Contract ExpressAuthority is expressly given to the agent by the principal. Principal and third party are bound to the contract. ImpliedAuthority is implied from the conduct of the parties, custom and usage of trade, or act incidental to carrying out the agent’s duties. Principal and third party acts are bound to the contract.

11. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 11 Summary: Formation of Agency Relationships (2 of 2) Type of Agency DefinitionEnforcement of the Contract ApparentAuthority created when the principal leads a third party into believing that the agent has authority. Principal and third party are bound to the contract. By RatificationActs of the agent committed outside the scope of his authority. Principal and third party are not bound to the contract unless the principal ratifies the contract.

12. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 12 Duty of Compensation  A duty that a principal owes to pay an agreed- upon amount to the agent either upon completion of the agency or at some other mutually agreeable time  If there is no agreement as to the amount of compensation, the law implies a promise that the principal will pay the agent the customary fee paid in the industry

13. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 13 Duty of Performance (1 of 2) An agent’s duty to a principal that includes: 1.Performing the lawful duties expressed in the contract, and 2.Meeting the standards of reasonable care, skill, and diligence implicit in all contracts

14. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 14 Duty of Performance (2 of 2)  An agent who does not perform his or her express duties or fails to use the standard degree of care, skill, or diligence is liable to the principal for breach of contract  An agent who has negligently (or intentionally) failed to perform properly is also liable in tort

15. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 15 Duty of Accountability  A duty that an agent owes to maintain an accurate accounting of all transactions undertaken on the principal’s behalf  This duty also requires the agent to: Maintain a separate account for the principal, and Use the principal’s property in an authorized manner

16. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 16 Termination of Agency by Acts of the Parties An agency may be terminated by the following acts of the parties: 1.Mutual agreement 2.Lapse of time 3.Purpose achieved 4.Occurrence of a specified event

17. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 17 Termination of Agency by Operation of Law An agency is terminated by operation of law, including:  Death of the principal or agent  Insanity of the principal or agent  Bankruptcy of the principal  Impossibility of performance  Changed circumstances  War between the principal’s and agent’s countries

18. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 18 Wrongful Termination of an Agency or Employment Contract  The termination of an agency contract in violation of the terms of the agency contract  The nonbreaching party may recover damages from the breaching party power right  The distinction between the power and the right to terminate an agency is critical

19. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 19 Agency: Contract Liability (1 of 2)  A principal who authorizes an agent to enter into a contract with a third party is liable on the contract  The third party can enforce the contract and recover damages if the principal fails to perform it

20. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 20 Agency: Contract Liability (2 of 2)  The agent can also be held liable on the contract in certain circumstances  Liability depends on whether the agency is classified as: Fully disclosed Partially disclosed Undisclosed

21. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 21 Fully Disclosed Agency  An agency that results if the third party entering into the contract knows: That the agent is acting as an agent for a principal, and The actual identity of the principal  The principal is liable to the third party  The agent is not liable

22. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 22 Partially Disclosed Agency  An agency that occurs if: The agent discloses his or her agency status but does not reveal the principal’s identity, and The third party does not know the principal’s identity from another source  Both the principal and the agent are liable to the third party if the principal fails to perform the contract

23. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 23 Undisclosed Agency  An agency that occurs when the third party is unaware of either: The existence of an agency, or The principal’s identity  Both the principal and the agent are liable to the third party if the principal fails to perform the contract

24. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 24 Tort Liability to Third Parties  The principal and the agent are each personally liable for their own tortious conduct  The principal is liable for the tortious conduct of an agent who is acting within the scope of his or her authority  The agent only is liable for the tortious conduct of the principal if he or she directly or indirectly participates in or aids and abets the principal’s conduct

25. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 25 Summary: Tort Liability of Principals and Agents to Third Parties (1 of 2) Agent’s ConductAgent Liable Principal Liable NegligenceYesThe principal is liable under the doctrine of respondeat superior if the agent’s negligent act was committed within his scope of employment.

26. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 26 Summary: Tort Liability of Principals and Agents to Third Parties (2 of 2) Agent’s ConductAgent Liable Principal Liable Intentional TortYesMotivation Test: The principal is liable if the agent’s motivation in committing the intentional tort was to promote the principal’s business. YesWork-Related Test: The principal is liable if the agent committed the intentional tort within work-related time and space.

27. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 27 Independent Contractor  Principals  Principals employ persons or businesses who are not employees to perform certain tasks on their behalf These persons and businesses are called independent contractors degree of control  The crucial factor in determining whether a person is an employee or an independent contractor is the degree of control that the principal has over that person

28. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 28 Liability for Independent Contractor’s Contracts  A principal can authorize an independent contractor to enter into contracts  Principals are bound by the authorized contracts of their independent contractors  If an independent contractor enters into a contract with a third party on behalf of the principal without express or implied authority from the principal to do so, the principal is not liable on the contract

29. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 29 Liability for Independent Contractor’s Torts  A principal is generally not liable for the tortious conduct of independent contractors it hires  Independent contractors are personally liable for their own torts  The rationale behind this rule is that principals do not control the means by which the results are accomplished

30. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 30 Exceptions: Where a Principal is Liable for the Torts of an Independent Contractor  There are several situations where the law imposes liability on a principal for the tortious conduct of an independent contractor he or she has hired: Inherently dangerous activities Negligence in the selection of an independent contractor

31. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 31 The right of workers to form, join, and assist labor unions is a statutorily protected right in the United States.

32. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 32 Federal Labor Union Statutes  Norris-LaGuardia Act (1933)  National Labor Relations Act (NLRA) (1935) Also known as the Wagner Act  Labor-Management Relations Act (1947) Also known as the Taft-Hartley Act  Labor-Management Reporting and Disclosure Act (1959) Also known as the Landrum-Griffin Act  Railway Labor Act (1926 as amended 1934)  Norris-LaGuardia Act (1933)  National Labor Relations Act (NLRA) (1935) Also known as the Wagner Act  Labor-Management Relations Act (1947) Also known as the Taft-Hartley Act  Labor-Management Reporting and Disclosure Act (1959) Also known as the Landrum-Griffin Act  Railway Labor Act (1926 as amended 1934)

33. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 33 National Labor Relations Board (NLRB)  Administrative agency created by the National Labor Relations (Wagner) Act: Oversees union elections Prevents employers and unions from engaging in illegal and unfair labor practices Enforces and interprets certain federal labor laws  NLRB decisions are enforceable in court

34. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 34 Organizing a Union  Section 7 of the NLRA  Section 7 of the NLRA – gives employees the right to join together to form a union  Appropriate Bargaining Unit  Appropriate Bargaining Unit – the group that the union is seeking to represent: Must be defined before the union can petition for an election Managers and professional employees may not belong to unions formed by employees whom they manage

35. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 35 Union Elections (1 of 2)  30 percent of the employees in the bargaining unit must indicate interest in joining or forming a union  NLRB is petitioned, investigates and sets election date: Contested election Consent election Decertification election

36. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 36 Union Elections (2 of 2)  If a simple majority of the employees of the appropriate bargaining unit vote to join a union, the union is certified as the bargaining agent of all the employees, even those who did not vote for the union

37. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 37 Illegal Interference with an Election  Section 8(a) of the NLRA employer  Section 8(a) of the NLRA – makes it an unfair labor practice for an employer to interfere with, coerce, or restrain employees from exercising their statutory right to form and join a union  Section 8(b) of the NLRAunions  Section 8(b) of the NLRA – prohibits unions from engaging in unfair labor practices that interfere with a union election

38. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 38 Collective Bargaining  The act of negotiating contract terms between an employer and the members of a union  Collective Bargaining Agreement  Collective Bargaining Agreement – the resulting contract from a collective bargaining procedure good faith  The employer and the union must bargain with each other in good faith

39. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 39 Subjects of Collective Bargaining (1 of 2)  Compulsory Subjects Wages Hours Other terms and conditions of employment  Illegal Subjects Closed shops Discrimination

40. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 40 Subjects of Collective Bargaining (2 of 2)  Permissive Subjects Size and composition of the supervisory force Location of plants Corporate reorganizations Any other subjects that are not compulsory or illegal

41. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 41 Strikes strike  The NLRA gives union management the right to recommend that the union call a strike if a collective bargaining agreement cannot be reached  A majority vote of the union’s members must agree to the action before there can be a strike

42. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 42 Picketing (1 of 2)  The actions of strikers walking in front of the employer’s premises carrying signs announcing their strike  The right to picket is implied from the NLRA  An employer may seek an injunction against unlawful picketing

43. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 43 Picketing (2 of 2) Picketing is lawful unless it: 1.It is accompanied by violence 2.Obstructs customers from entering the employer’s place of business 3.Prevents non-striking employees from entering the employer’s premises 4.Prevents pickups and deliveries at the employer’s place of business Picketing is lawful unless it: 1.It is accompanied by violence 2.Obstructs customers from entering the employer’s place of business 3.Prevents non-striking employees from entering the employer’s premises 4.Prevents pickups and deliveries at the employer’s place of business

44. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 44 Secondary Boycott Picketing  A type of picketing where unions try to bring pressure against an employer by picketing his or her suppliers or customers  Such picketing is lawful only if it is product picketing  It is illegal if it is directed against the neutral employer instead of the struck employer’s product

45. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 45 Illegal Strikes  Several types of strikes have been held to be illegal  They are not protected by federal labor law  Illegal strikers may be discharged by the employer with no rights to reinstatement

46. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 46 Illegal strikes are:  Violent Strikes  Sit-Down Strikes  Partial or Intermittent Strikes  Violent Strikes  Sit-Down Strikes  Partial or Intermittent Strikes  Wildcat Strikes  Strikes during the 60- day Cooling-Off Period  Strikes in Violation of a No-Strike Clause  Wildcat Strikes  Strikes during the 60- day Cooling-Off Period  Strikes in Violation of a No-Strike Clause

47. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 47 Crossover Worker  Individual members of a union do not have to honor the strike  They may: 1.Choose not to strike, or 2.Return to work after joining the strikers for a time

48. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 48 Replacement Workers  Workers who are hired to take the place of striking workers  They can be hired on either a temporary or permanent basis  If replacement workers are given permanent status, they do not have to be dismissed when the strike is over

49. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 49 Employer Lockout  An act of an employer to prevent employees from entering the work premises when the employer reasonably anticipates a strike

50. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 50 Workers’ Compensation Acts (1 of 4) Acts that compensate workers and their families if workers are injured in connection with their jobs.

51. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 51 Workers’ Compensation Acts (2 of 4)  Depending on the state, employers are required either: To pay for workers’ compensation insurance, or To self-insure by making payments into a contingency fund  Workers’ compensation benefits vary by state and are paid according to preset limits established by statute or regulation

52. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 52 Workers’ Compensation Acts (3 of 4)  Employment-Related Injury To recover under workers’ compensation, the worker’s injuries must have been employment- related Many workers’ compensation acts include stress as a compensable work-related injury

53. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 53 Workers’ Compensation Acts (4 of 4)  Exclusive Remedy Workers’ compensation is an exclusive remedy Workers cannot sue their employers in court for damages An exception occurs when an employer intentionally injures an employee

54. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 54 Occupational Safety and Health Act (1 of 3)  Enacted in 1970 to promote safety in the workplace Occupational Safety and Health Administration (OSHA)  Established the Occupational Safety and Health Administration (OSHA)  Generally, all private employers are within the scope of the act  Federal, state, and local governments are exempt

55. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 55 Occupational Safety and Health Act (2 of 3) record keeping reporting requirements  The act imposes record keeping and reporting requirements on employers  Employers are required to post notices in the workplace informing employees of their rights under this act  OSHA is empowered to administer the act and adopt rules and regulations to interpret and enforce it

56. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 56 Occupational Safety and Health Act (3 of 3) health hazardssafety violations  OSHA is empowered to inspect places of employment for health hazards and safety violations written citation  If a violation is found, OSHA can issue a written citation Requires the employer to abate or correct the situation

57. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 57 Types of OSHA Standards Specific Duty Standard  Addresses a safety problem of a specific duty nature e.g., requirement for a safety guard on a particular type of equipment Specific Duty Standard  Addresses a safety problem of a specific duty nature e.g., requirement for a safety guard on a particular type of equipment General Duty Standard  A duty that an employer has to provide a work environment “free from recognized hazards that are causing or are likely to cause death or serious physical harm to his employees.” General Duty Standard  A duty that an employer has to provide a work environment “free from recognized hazards that are causing or are likely to cause death or serious physical harm to his employees.”

58. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 58 Fair Labor Standards Act (FLSA) of 1938 (and subsequent amendments)  Federal act enacted to protect workers Prohibits child labor Establishes minimum wage requirements Establishes overtime pay requirements

59. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 59 FLSA: Child Labor  The FLSA forbids the use of oppressive child labor  It is unlawful to ship goods produced by businesses that use oppressive child labor  The Department of Labor defines the standards for lawful child labor

60. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 60 FLSA: Minimum Wage and Overtime Pay  Managerial, administrative, and professional employees are exempt from the FLSA’s wage and hour provisions  Employers are required to pay covered (non- exempt) workers at least the minimum wage for their regular work hours  Overtime pay is also mandated

61. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 61 Minimum Wage  Set by Congress and can be changed  Currently, it is set at $5.15 per hour  Employers are permitted to pay less than minimum wage to students and apprentices  An employer may reduce minimum wages by an amount equal to the reasonable cost of food and lodging provided to employees

62. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 62 Overtime Pay one-and-a half times their regular pay for each hour worked in excess of 40 hours  An employer cannot require nonexempt employees to work more than 40 hours per week unless they are paid one-and-a half times their regular pay for each hour worked in excess of 40 hours  Each week is treated separately

63. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 63 Family and Medical Act (1993)  A federal statute that guarantees covered workers unpaid time off from work for: Birth or adoption of a child Serious health problems of the worker Serious health problems of a spouse, child, or parent  The act applies to companies with 50 or more workers as well as federal, state, and local governments

64. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 19 - 64 Plant Closing Act  Worker Adjustment and Retraining Notification (WARN) Act (1988)  Covers employers with 100 or more employees  Requires employers to give their employees 60 days’ notice before engaging in certain plant closings or layoffs