Uber
In chapter 5, we learned about the agency. Part of that chapter examined the two types of agency relationships: employees and independent contractors. The textbook contained a summary of the Jane Doe 1 v. Uber Technologies, Inc. case. The Uber business model (as well as similar providers like Lyft) provides a very interesting situation of whether the drivers are employees or independent contractors. If you are not familiar with Uber, do some research on Uber’s business model and then make an argument for how you believe the drivers should be classified. Do you believe that the drivers are independent contractors or employees?
Week 2:
Chapter 5 covers agency principles. Agency is a touchstone legal principle for business because corporations and LLCs, as an independent legal entity, cannot operate itself. For example, a corporation cannot execute a contract, but a person with such authority can execute a contract on behalf of the corporation. The agency relationship is what gives the person the authority to execute the contract on behalf of the corporation. Thus, agency is an important aspect of business operations.
Chapter 6 examines administrative law. There are many federal agencies, and businesses no doubt interact with federal agencies. For example, the Occupational Safety and Health Administration has broad oversight for compliance with workplace safety regulations and, thus, may investigate whether a business is complying with federal (and sometimes state) safety rules. States have analogous agencies as well; however, our discussion will be about administrative law as related to federal agencies.
Agency Lecture pt. 1
-Agency relationship: a person known as the agent acts on behalf of or as a representative of another person or entity known as the principle.
-the principle delegates authority to the agents to act.
-agency relationship is essential to business.
-agency relationship is what allows companies to operate. Without an agent, corporations could not function.
Agency relationships
-employer- employee (aka master servant)
-principle- independent contractor
-What are the legal consequences between 2 relationships?
1- legal libality: under respondeat superior doctrine, employer is liable for the wrongful acts of employees. Conversely, principles are generally not liable for the wrongful acts of independent contractor.
2- taxes: employers must withhold income, social security, and unemployment taxes from an employees pay, whereas principles have no such withholding obligations for pay to an independent contractor. Instead, independent contractors are obligated to pay these taxes.
3- benefits: employees usually participate in fringe benefits from employer ( ex: PTO, retirement contributions, and insurance), whereas independent contractors do not.
4- wages: employees must be paid overtime wages (unless exempt), whereas independent contractors are generally not paid overtime wages.
5- workers compensation: employees who sustain on the job injuries may be entitled to workers compensation benefits, whereas independent contractors would not receive workers compensation benefits.
-Example: Brandon owns a local sporting goos store. Brand and another person, Mark, work at the store each day. One morning, Brandon and Mark arrive at the store to find a water leak. Brandon calls a plumber, Will. Will comes later that day and is at Brandons store for four hours during which time Will repairs the water leak. Mark is an employee, as we works at the store every day it is open and works at the owners direction. In contrast, Will is not an employee, but rather an independent contractor. Will does not work regularly at Brandons store. Nor does Will follow Brandons direction.
How do you distinguish between an employee and independent contractor?
-there is no bring line test.
-it is a facts and circumstances determination made on a case by case basis.
-parties characterization of relationship is not dispositive.
-rather, courts consider a number of factors.
-factors:
-control: who controls details of work
-type of work: is the occupation distinct from one another
-supervision: is work type usually performed under employer supervision or independently
-skill: what degree of skill is involved
-who provided tools and equipment
-duration of work: how long is person working
-form of payment: based on time or by the job
-does worker perform services for anyone else
Agency Relationship
-based on the consequential differences between employees and independent contractors, employers may be tempted to classify workers as independent contractors to avoid tax withholding obligations and benefits and possibly overtime wages.
-Employers, however, must be careful to accurately classify workers. The Department of Labor and IRS may audit employers and reclassify workers deemed independent contractors to really be employees. This is what happened to Microsoft in the 1980s as discussed in the textbook.
-Misclassifications of workers has been a hot topic for the DOL over the last few years.
-hiring temporary workers from a staffing agency is not a solution.
-first, staffing agencies charge a higher price than an employer would most likely pay an employee. As such, the arrangement will likely be more costly.
-second, joint employment will likely exist. That is, the employer and standing agency are joint employers of the worker. As a joint employer would treat the temporary worker as an employee and, thus does not service the perceived benefits of an independent contractor status.
Agency Lecture pt. 2
Fiduciary duty
-a fiduciary duty is an obligation to an act in the best interest of another person or entity.
-examples: Trustee has a fiduciary duty to the trusts beneficiaries; corporations board has a fiduciary duty to its shareholders.
-duty of loyalty:
-agent has duty to act for the benefit of the principle.
-agent is prohibited from acting for private interests.
-duty of care:
-agent has a duty to avoid mistakes and errors
-agent has a duty before making a decision to be informed of all material information reasonably available. (Ex: make well informed decisions)
-duty of obedience:
-agent has duty to abide by the principles reasonable and lawful orders.
-duty of confidentiality:
-agent has duty to keep information confidential if required
-duty of disclosure:
-agent has duty to act with complete candor and, thus, must disclose all facts and circumstances.
-duty of good faith:
-agent has duty to fulfill his/her duties and not violate the law.
Agents authority
-an agent can bind the principle through either actual or apparent authority
-actual authority: where the principle purposefully gives the agent authority to act on its behalf.
-example: in a board of directors meeting, ABC Corporation gives CEO Billy McKee authority to execute contracts necessary to purchase DEF Corporation.
-actual authority is typically documented by either board minutes or corporation bylaws/ operating agreement.
-necessary to record authority in corporate records
-actual authority can be either express or implied.
express actual authority:
-principle gives experts authority by words or by action.
-words: CEO tells HR manager to complete employment contract for new operations supervisor.
-action: CEO sends HR manager signed offer sheet
-express authority can also be found when agent has a justifiable belief that the principle gave authority.
implied actual authority
-when the agent has express authority, the agent also has implied authority to act as is reasonably necessary to complete the given task.
-you can look at usual authority (ex: the authority that has typically been given in the past.)
-you can also look at customary authority (ex: the authority that such an agent would usually have.)
-example: if CEO instructs operations VP to plan a company retreat, the operations VP would have implied authority to execute contract to rent meeting space and hire a catering company.
Apparent authority:
-exists when a third party is led to reasonably believe that the agent has authority to act for and bind the principle.
-apparent authority can exist based on the principles words or acts, or on past history (ex: providing the agent with authority in the past)
-the principle- not the believed agent- creates apparent authority. The alleged agents statements cannot create apparent authority.
-example: CEO tells third party vendor that VP makes all purchasing decisions. Third party vendor would reasonably believe that VP has apparent authority to execute purchase agreement.
Ratification:
-if a purported agent makes an authorized act, the principle can ratify the act to cure the lack of authority.
-once ratified, the act is as if the agent had authority to bind the principle.
Undisclosed Principle:
-it is lawful for the principle to remain confidential or private
-third party has no right to even know of principle
-valuable when it is strategic for principle to remain unknown.
-example: when a valuable company is buying land, using an undisclosed principle may be strategic and beneficial to avoid the seller from seeking a premium.
-if agent acts outside scope of authority, the principle should not be bound; however, the rent may be personally liable to the third party.
Agency Liability
-respondeat superior: employer of agent will be liable for personal injuries or property damage caused by the agent while acting the course and scope of employment.
-respondeat superior is also referred to as vicarious liability.
-remember that this doctor is limited to employees, not independent contractors.
-key to liability is that agent employee must be acting in the course and scope of employment.
-employer is not liable for agent/employees tort when it occurs outside the scope of the employees employment.
Factors for deciding whether an agent/employee is acting within the scope of his/her employment:
-Whether the employees act was authorized by the employer;
-the extent to which the employers interests were advanced by the act;
-whether the employer furnished the instrumentality that caused the injury; and
-whether the employer had reason to know the employee would perform the act.
Agency liability
-Detour vs Frolic:
-detour is a minor deviation from employers business and would most likely still be considered within the scope of employment.
-Frolic is a substantial deviation from the employers business and would be outside the scope of employment.
-even if employee acts outside of scope of employment, employer may be liable if:
-the employer intended the employees conduct or consequences;
-the employees position makes him/her the companys alter ego;
-the employees actions is attributable to the employers own negligence or recklessness;
-the conduct violated a non delegable duty of the employer; or
-the employee purported to act on behalf of the employer and there was reliance on apparent authority.
