Chapter 11 - Chapter 11 Understanding agency law is a crucial first step to understanding laws that govern rights duties and obligations between

Chapter 11 - Chapter 11 Understanding agency law is a...

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Chapter 11 Understanding agency lawis a crucial first step to understanding laws that govern rights, duties, and obligations between employers and employeesDefinitions and Sources of Agency LawAgency is a legal relationship in which the parties agree, in some form, that one party will act as an agent for another party called the principle,subject to the control of the principle Understanding agency law requires one to be aware of oLegal requirements for creating an agency oLiability of a principal for the agent’s conduct oDuties and obligations of the parties Agency law generally exists on the state statutory level and is based on the Restatement of AgencyClassifications of Agents Employee Agents Independent Contract Agents Gratuitous Agents Employee Agents Employee Agents – individual employees who are authorized to transact business on behalf of the employer principal. Principals are liable for the actions and omissions of employee agents Independent Contractor Agent – by contrast is not considered an employee and has no legal protections of employees such as minimum-wage an overtime-compensation laws Gratuitous Agents – agents who act on behalf of a principal without receiving any compensation Employee Agents versus Independent Contractors: Direction and Control Substance over form – analysis to determine the classification of an agent. Agent is classified based on the amount of direction and control that the principle has over the agent in terms of setting work schedule and pay and determining day-to-day supervision. An independent occupation or profession in which the agent has more than one customer or client (accountants, attorneys, architects) indicates and independent contractor IRS Three-Prong Test Used to determine agent’s statusThe IRS considers oBehavioralaspects of the agency oThe financial arrangements between the principal and agent oThe type of working relationships the parties have in terms of benefits and promises of continuing employment Agency Transactions An agency transaction involves 1 party hiring another party to transact business on behalf of the hiring party Business owners and managers depend on agents to carry out the daily operations of the business
oUse agents to enter into contract, perform necessary services, and advance their objective in various ways. First, an agency relationship is typically created expressly by the parties with the duties of the agent being set out by the principal Second, the parties perform their respective duties in accordance with their agreement and agency law Finally, an agency transaction is ended by the termination of the agency by the partiesSometimes terminated by operations of law Creation of an Agency Relationship The Restatements define the creation of an agency relationship in terms of consent and control Agency is described as a fiduciary relationship

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