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Management Of Employee Conduct
Reflect on the assigned readings for the week. Identify what you thought was the most important concept(s), method(s), term(s), and/or any other thing that you felt was worthy of your understanding.
Also, provide a graduate-level response to each of the following questions:
- Explain and analyze the duties owed by each party in an agent/principal relationship.
- What steps should an organization take to limit apparent authority that it does not intent to bestow on an agent?
SHORT ESSAY:
Question I – Brandon installs sheds and storage buildings for Shedmax, LLC. Brandon must be at work each day by 8:00 a.m. and is off at 5:00 p.m. and is paid at a rate of $12/hour. Brandon uses tools provided by Shedmax to do his work. However, when Brandon is completing the installation process, he is often working alone. Is Brandon an employee of Shedmax or an independent contractor? Give a reasoning for your answer.
Question II – Flowers by Frida is a florist that operates in one county in Kentucky. Frida hires Frederick as an employee and presents a non-compete agreement, which states Frederick shall never open his own florist in Kentucky or in any state that boarders Kentucky. Is this non-compete agreement reasonable? Why or why not?
Chapter 16 Management of Employee Conduct: Agency Law
Its Legal, Ethical, and Global Environment
Marianne M. Jennings
Business
11th Ed.
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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Nature of Agency: Agency Relationship is One in Which One Party Agrees to Act on Behalf of Another
Examples: sales clerks, real estate agents, sports agents
Principal: The Party for Whom the Agent Acts
Agent: Party Who Acts for Another
Terminology
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Master/Servant
Relationship in which the master/principal exercises a great deal of control over the servant/ agent. Most common form is employer/employee relationship
Factors that control whether this type of relationship exists
Level of supervision
Level of control
Nature of agent’s work
Regularity of hours and pay
Length of employment
Terminology
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Independent Contractor
Hired to perform a task but is not directly supervised
Example: Lawyer
Agency Law: Restatement of Agency
Common law followed by most courts
Terminology
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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Three Parts to Agency Law
Creating the agency relationship
Relationship between principal and agent
Relationships of agent and principal to third parties
Terminology
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Creating the Agency Relationship: When the Principal Hires Someone
Express Authority Agency
Created by principal stating or writing that agency exists and the authority thereof
Requires oral or written agreement − must be in writing if required by statute of frauds
Example: Agency contract is longer than one year
Agency Creation
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Principal Must Have Legal Capacity
Age and mental capacity
Capacity: Unincorporated Associations Do Not Have Capacity
Have no legal existence
Members will be liable since there is no principal
The Capacity of Agent Becomes an Issue When it Concerns
Authority to enter contracts
Potential liability to third parties
Agency Creation
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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Signing As An Agent
_____________________
(Your Group Name)
_____________________
By: (Your Name)
_____________________
(Your Title)
The Phoenix Association of Managers
By: Marianne Jennings
Treasurer
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Implied Authority: The Extension of Express Authority By Custom
Apparent Authority
Arises from the way agents present themselves to third parties
Also called agency by estoppel or ostensible authority
Examples: Failure to notify of an agent’s retirement, allowing bank to use your name for another’s loan
Agency Creation
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Case 16.1 Thomas v. Weatherguard Construction Company, Inc. (2015)
What were the trappings of apparent authority?
What were the signals that something was amiss?
Who has liability?
Apparent Authority
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Agency by Ratification
Principal reviews contract and decides to honor it even though agent had no authority to enter into it
Agency Creation
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Principal-Agent Relationship
Agent’s Responsibilities
Agent acts in the principal’s best interests
Loyalty, trust, care, obedience
Loyalty
Agent can’t represent both sides
Can’t make a profit at principal’s expense
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Case 16.2 Lucini Italia Co. v. Grappolini (2003)
How was the agent playing both ends of the deal here?
What should the U.S. principal have done to catch the problem earlier?
Comment on the ethics of the agent
Fiduciary Duties
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Duty of Loyalty
Post-Employment Agreements
Covenants Not to Compete
Must Be Necessary (Purpose for Restricting Employee’s Post-Termination Work)
Must Be Reasonable in Time and Geographic Scope
Must Be Voluntary
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Noncompete Agreements
Not Given Time to Negotiate
Non-compete Terms are Not Part of Original Agreement
No Consideration to Support Terms
No Right to Discuss With Their Own Counsel
California Issues – Loathe to Enforce
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Noncompete Agreements
Case 16.3 Garon Foods, Inc. v. Monteith (2013)
Describe the length of employment
Explain what Sarah did after she left her job
What is the judge’s solution?
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Agent: Obedience
Follows principal’s instructions
Need not do anything illegal
Agent: Duty of Care
Give time and effort
Follow through
Principal: Duties and Rights
Duty to pay – Except gratuitous agency
Duty to reimburse
Rights and Duties
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Principal’s Liability to Third Parties
Contract liability and issues of disclosure
Principal has full liability for authorized acts of agent and those done with apparent authority
Disclosed principal − principal is fully liable; agent is not unless the agent had no authority
Principal’s Liability
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Principal’s Liability
Contract Liability and Issues of Disclosure
Partially disclosed principal − agent indicates there is a principal but does not tell who it is; third party can hold either liable
Undisclosed principal − agent does not disclose there is a principal; agent stands alone unless principal comes forward
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Contract Liability of Disclosed Principal
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Contract Liability of Undisclosed or Partially Disclosed Principal
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Liability of Principals for Torts
Must have master-servant relationship, not independent contractor
Liable for torts of servants in scope of employment
Scope = doing master’s work
Doctrine of respondeat superior-let the master answer
Not liable for torts committed while on frolic
Principal’s Liability
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Faverty v. McDonald’s Restaurant of Oregon, Inc. (1995)
Why would a restaurant association have an interest in the outcome of the case?
Case 16.4 Lange v. National Biscuit Co. (1973)
What test does the court give for determining scope of employment?
Scope of Employment
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Non-Scope Issues
Liability if There was Negligent Hiring
Failure to screen
Failure to do background check
Liability if There was Negligent Retention
Failure to take action when employee engages in dangerous behaviors or takes risk
Knowledge + inaction = Liability
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Principles are Generally Not Liable for the Torts of Independent Contractors
Exceptions
Inherently dangerous activities
Negligent hiring of independent contractor
Principal provided specifications for project or job
Principal’s Liability
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Due To
Definite duration of time
Agent quits/is fired
Principal dies/is incapacitated
Need to give public or constructive notice (trade publication)
Actual notice (letters)
Without notice, agent will have lingering apparent authority
Agency Termination
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Has No Definite Ending Date
Usually There is No Formal Written Contract
Used to be They Could be Fired at Any Time
Termination of At-Will
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The Do’s and Don’ts of Firing At-Will Employees
Do:
Conduct regular reviews of employees, using objective, uniform measures of performance
Don’t:
Make oral promises of job security to employees who might later be laid off
Danger: Breach of contract suit
Termination of At-Will
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The Do’s and Don’ts of Firing At-Will Employees
Do:
Give clear, business-related reasons for any dismissal, backed by written documentation when possible
Don’t:
Put pressure on an employee to resign in order to avoid getting fired
Danger: Coercion suit
Termination of At-Will
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Do:
Seek legal waivers from older workers who agree to leave under an early-retirement plan, and make sure they understand the waiver terms in advance
Don’t:
Make derogatory remarks about any dismissed worker, even if asked for a reference by a prospective employer
Danger: Defamation suit
Termination of At-Will
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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Do:
Follow any written company guidelines for termination, or be prepared to show in court why they’re not binding in any particular instance
Don’t:
Offer a fired employee a face-saving reason for the dismissal that’s unrelated to poor performance
Danger: Wrongful discharge suit
Termination of At-Will
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The Implied Contract
In some states personnel manuals will be a contract if employees rely on its procedures
Case 16.5 Dillon v. Champion Jogbra, Inc. (2002)
Were there representations about her continuing employment?
What should the company have done differently?
Termination of At-Will
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The Public Policy Protection − Whistleblowers
Whistle Blower Protection Act of 1978
False Claims Act
Protection for Whistleblowers − The Anti-Retaliation Statutes
Passed in many states and by federal agencies
Prohibit firing, demotion, reprimands, and pay cuts of employees who report conduct of their employers
Public Policy
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Whistleblowing Tips
Encourage whistleblowing. Publicize your hot line for disclosing illegal activity and encourage employees to come forward. Eliminate employee fears by directing the investigation of complaints to someone outside a reporting employee’s chain of command. Be certain that all complaints are investigated and that investigations are done promptly. Whenever possible, publicize the investigation and its outcome to encourage other employees to come forward.
For the employee, the following suggestions should be followed:
Consult family and close friends for perspective and support.
Work within your system and through its chain of command before going public. Go through the various layers of management, even to the board of directors.
3. Voice/write your concerns; don’t make accusations.
4. Maintain records of your internal contacts and their objections.
5. Find other employees who also know about this potentially volatile situation.
6. Keep a record of your information and carefully document your complaints. Eliminate speculation, personal opinion, and anger. Be objective.
7. Maintain copies of records.
8. Find support groups in your community (and nationwide, if necessary).
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Case 16.6 Hadley v. Duke Energy Progress (2016)
What were Hadley’s concerns?
Does he qualify for protection as a whistleblower?
Public Policy
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Protection for Whistleblowers − The Anti-Retaliation Statutes
Federal level − Energy Reorganization Act affords protection for employees involved in nuclear work
Whistleblowing for both employers and employees
Many companies have created a peer review process for termination and other actions against employees
Public Policy
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Pitfalls of Complex Global Organizations
Complex interrelationships often evade the law
Example: BCCI and its complex structure
Disclosure of interrelationships becomes important for conflicts, compliance
International Law
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