Agency and Employment Law Notes

Transitioning from agency law to employment law, noting their interconnectedness.
Agency law encompasses employer-employee relationships and employer-independent contractor relationships.

Exists between employers and employees, or employers and independent contractors.
Employment relationship is more involved and complex compared to the independent contractor relationship.
The classification of workers has been a prominent topic, including legislative actions like the ABC test in California. There is active litigation attempting to modify these laws.

No definitive answer; some individuals prefer being independent contractors (e.g., graphic designers with diverse clients).
Employee Benefits:
- Employees pay half of Federal Insurance Contributions Act (FICA) taxes (Social Security and Medicare).
- Employees protected under employment laws like Title VII and FHA.
- Employees are entitled to unemployment benefits and worker's compensation.
- Employees are entitled to meal breaks and overtime pay.
Employer Perspective:
- Some employers prefer the employee relationship for fostering company loyalty.
- Independent contractors eliminate the need for employers to handle taxes, benefits, and tracking of work hours/breaks.
- For example, paying an independent contractor $50$ an hour simplifies to writing a check for $500$ for ten hours of work, issuing a 1099 form at year's end instead of managing taxes and benefits.

Case example involving a television host in Puerto Rico paid per episode as an independent contractor.
She was not given breaks and was terminated after becoming pregnant.
She alleged discrimination based on pregnancy, which is illegal for employees.
The court ruled she was an independent contractor, thus not protected under employment laws.

The IRS generally uses the control test: how much control the employer has over the worker's activities.
California's ABC test: Classifies workers as employees unless specific criteria are met.
- Applying this to Uber drivers, which has been greatly debated.
- A. is the worker free from the control and direction of the employer?: Uber drivers have some freedom but must adhere to requirements (dress code, client interaction, car cleanliness).
- B. Do they perform work outside the high risk core business?: Uber claims to be an app connecting riders and drivers.
- C. Customarily engages in an independently established trade occupation of business?: Drivers may act more independently.

A key issue: Is the principal liable for contracts entered into by the agent (authorized vs. unauthorized)?
Important for businesses when contracting with managers: does the manager have the authority to bind the principal (owner)?
Examples:
- Authorized: A district manager for McDonald's hiring cleaning firms.
- Unauthorized: A sales associate at Best Buy agreeing to stock only specific equipment.
Clear cases: A cashier at a fast-food restaurant cannot commit to painting the restaurant.
Less clear cases: Challenges in determining authority with managers or assistance managers.

Torts:
- Employers are typically responsible for employee torts if within the course and scope of employment (doctrine of Respondeat Superior).
- Less liability for independent contractors due to less employer control.
Crimes:
- Principals generally not liable for agents' crimes unless the crime occurred within the scope of employment or the principal participated in the crime.

Earlier decisions can affect later decisions (Stare Decisis).
Franchisors expand through franchises and face liability issues based on their control over franchisees.
Too much control expands franchisor liability.

An Arby's franchise hired a man on a work-release program.
The man killed his ex-girlfriend's fiancé and injured her while on a break.
The girlfriend sued the franchisor for negligence and vicarious liability.
The court ruled the franchisor was not responsible because they did not control employee supervision, even though they had many rules with the franchisee (colors, ingredients, ect.).
The franchisor did not control the hiring process, only requiring adherence to state and federal laws.

McDonald's was aware of armed robbery threats, establishing a corporate division for franchise security.
A regional security manager noted security problems at a franchisee.
During a robbery, one woman was killed, and two were assaulted.
Lawsuits were filed against both the franchisee and franchisor, questioning if the franchisor was liable for negligence by not following up on recommended changes.

If representing McDonald's, you might argue:
- Similarities: Both concern franchisor-franchisee liability for fast-food restaurants; violence occurred away from the franchisor's location; both involved violent acts by individuals not directly controlled by the franchisor; could have been avoided with more proactive franchisees.
If representing the plaintiffs, you might argue:
- Differences: The Arby's franchisor had no control over hiring, while McDonald's assumed control over safety by setting up a security division and conducting inspections.

More control the franchisor has, the more likely they are liable for torts and contracts.
Franchisors need control to maintain brand value but face increased liability.
Ethics question: Would McDonald's have been better off legally by not addressing security at all? Ethically, this is questionable, but legally, it could impact liability.

Key takeaway: the ABC test may lead to the reclassification of many independent contractors as employees.

The doctrine of employment at will means that an employee can be fired in many cases.