MGMT 311 - Chapter 19: Agency Relationships

MGMT 311 - Chapter 19: Agency Relationships

• Agency is defined as the fiduciary relationship created when one party consents to another acting on their behalf, subject to their control. Fiduciary is key.
• Agency relationships are categorized as: Employer-Employee and Employer-Independent Contractor.
• Employer-Employee relationships often involve employees interacting with third parties, making them agents of the business.
• Employer-Independent Contractor relationships involve individuals contracted to perform tasks but not controlled by the employer.
• Determining whether a worker is an employee or independent contractor involves evaluating control over work details, distinct occupation, tools provided, employment length, payment method, and required skill.

Determination of Employee Status

• IRS criteria prioritize the degree of control the business exercises over the worker.
• Misclassification (incorrectly categorizing workers) can lead to significant tax liabilities.
• Employees who create copyrighted work are typically the copyright holders. Exceptions exist, with "work for hire" status. If an employee creates a work with the scope of their job, the employer generally owns copyright.
• Independent contracts do not commonly fall under copyright laws.

Formation of Agency Relationship

• Agency relationship formation is consensual (voluntary).
• Agreements don't necessarily need to be written.
• Agency relationships made for illegal purposes are invalid.
• Written or oral agreements can create agency relationships based on expressed or implied terms.
• Agency by ratification occurs when a principal accepts a contract made by someone (not an authorized agent) and thus becoming bound by the contract.
• Agency by estoppel occurs if a person represents themselves as an agent, allowing third parties to reasonably believe it, and the principal does nothing to rectify this.
• Agency relationships can be created by law.

Duties owed to the Principal

• Agents owe principals duties of performance, notification, loyalty, obedience, and accounting.
• Performance involves diligently carrying out duties with reasonable care.
• Notification requires agents to inform principals of all relevant matters.
• Loyalty dictates that agents act solely in the principal’s best interest.
• Obedience requires following lawful, clear instructions.
• Accounting involves keeping accurate records and reporting all funds.

Duties owed to the Agent

• Principals owe agents duties of compensation, reimbursement, indemnification, cooperation, and safe working conditions.

• Compensation involves paying a fair price for services rendered.

• Reimbursement covers expenses incurred by the agent.

• Indemnification protects agents from liabilities arising from authorized actions.

Agent's Authority

• Agency authority can be actual (expressed or implied) or apparent.
• Expressed authority clearly outlines the agent's powers to act.
• Implied authority logically flows from expressed authority.
• Apparent authority arises when a principal leads a third party to believe an agent has specific authority, but the agent does not have this authority.
• Power of Attorney (POA) provides express authority.

Agent's Authority Cont'd

• Emergency powers allow agents to act in extraordinary situations to protect the principal's interests.
• Ratification signifies a principal's acceptance of an agent's previously unauthorized actions.

Liability in Agency Relationship

• Principal liability depends on whether the agent's actions were authorized or not.
• Liability classifications include disclosed, partially disclosed, and undisclosed principals.
• Disclosed principals' identities are known to third parties; liability generally rests with the principal.
• Undisclosed principals' identities aren't apparent, potentially exposing both agents and principals to liability.

Liability for Torts & Crimes

• Principals' liability for agent's torts depends on several factors, including principal negligence and authorization to commit tortious acts.
• Respondeat superior holds employers liable for their employees' negligent actions within the scope of employment.
• Scope of employment determines whether an action is within the agent's duties.
• An employer is not usually liable for an independent contractor's tortious acts.

Termination of Agency

• Agency relationships can end by act of the parties (mutual agreement, revocation, renunciation) or by operation of law (death, incapacity, bankruptcy).
• All parties (and third parties aware of an agency relationship) need to be notified of a termination to ensure issues of liability are clarified.

Explore the intricacies of agency relationships as defined in MGMT 311 Chapter 19. This chapter delves into the definitions, categories, and criteria for determining employee status versus independent contractors, emphasizing the importance of fiduciary responsibilities. Understand the implications of misclassification and the IRS criteria in these relationships.