Introductory Business Law

Agency and Employment Law

Overview

Agency law governs relationships in which one person (the agent) acts on behalf of another (the principal). Employment law further regulates how businesses recruit, manage, and terminate workers while complying with anti‑discrimination statutes and wage‑hour rules.

Key Concepts

Creation of Agency: Agreement, estoppel, ratification, or operation of law.
Types of Authority: Actual (express/implied), apparent, and emergency.
Duties: Agent’s fiduciary duties (loyalty, care, obedience, accounting) and principal’s duties (compensation, reimbursement, indemnification).
Liability of Principal: Contract liability when agent acts within authority; tort liability under respondeat superior for employee negligence within scope of employment.
Employment‑at‑Will: Either party may terminate absent contract or statutory protection.
Statutory Protections: Title VII, ADEA, ADA, FLSA minimum wage/overtime, OSHA workplace safety.
Independent Contractor vs. Employee: Control test, economic realities test—impacts taxes and liability.

Step‑by‑Step Example

Scenario: Fast‑Deliver, Inc. hires Sam as an employee‑driver. During a scheduled delivery, Sam negligently injures a pedestrian. Who is liable?

Step 1 – Employment Status: Sam is an employee (Fast‑Deliver controls schedule, vehicle, uniform).

Step 2 – Scope of Employment: Accident occurred while performing assigned delivery—within scope.

Step 3 – Tort Liability: Under respondeat superior, employer is vicariously liable for employee’s negligence in scope.

Step 4 – Agent’s Liability: Sam remains personally liable to the pedestrian.

Answer: Both Sam and Fast‑Deliver are liable; pedestrian can recover damages from either party.

Quick Tip

To reduce vicarious‑liability risk, document drivers as independent contractors only when the business truly lacks control—misclassification can trigger IRS penalties and back wages.