An agency relationship arises when one person (the agent) acts for the benefit of and under the direction of another (the principal).A principal is bound on a contract entered into on his behalf by an agent if the agent had authority to act for the principal. Such authority may be either actual or apparent. Actual authority may be expressed or implied. Even if no actual authority has been given, the principal may be held liable because he either appeared to give authority to the agent (apparent authority) or ratified the act of the agent (or one posing as an agent).

If you operate a business that employs even one person outside your own family, you must comply with a myriad of statutes. These statutes impose duties on employers that supplement and greatly increase the duties imposed by the common law of agency. Many of the statutes require you to keep records and often to make reports to both state and federal agencies. In addition, recent changes in the common law doctrine of employment at will may impose new duties on you as an employer.

STEP ONE:

ASSIGNED READING:Read Chapters 23, 24 and 25 of Law for Business (Barnes, 2012)

STEP TWO:

BACKGROUND:

Of all of the common law duties an agent owes the principal, the most important is the fiduciary duty of loyalty. A fiduciary is one who is trusted to act in the best interests of another rather than pursuing his or her own interests. While all of the other common law duties can be reduced by agreement, the duty of loyalty cannot be eliminated. In fact, courts are hesitant to enforce an agreement that diminishes this duty in even the slightest way.

HYPOTHETICAL:

Cameco, a producer of food products, employed Gedicke as a salaried traffic manager at a salary of approximately $38,000 per year. Gedicke's primary duty was arranging transportation of Cameco's food products to retail stores by common carrier. His duties included coordinating Cameco's shipping schedules, negotiating the lowest possible shipping rates, and supervising the warehouse employees who loaded the trucks. Because of his position, Gedicke became familiar with the identity of Cameco's suppliers, customers, and common carriers, as well as its delivery routes and rates. Without telling Cameco, Gedicke and his wife formed Newton Transport service, which Gedicke operated primarily out of his home. Acting on behalf of distributors or truckers, Gedicke arranged for the transportation of food products to retailers. After several years, Newton Transport's profits exceeded $62,000 a year. Two of the distributors for which Newton Transport arrange transportation sold the same products as Cameco. On over 600 occasions, Gedicke arranged for a trucker transporting Cameco's goods also to transport goods for Newton Transport's customers. However, the addition of Newton Transport freight actually enabled Gedicke to negotiate lower rates for Cameco. Gedicke admitted that he engaged in telephone conversations relating to Newton Transport's business during his scheduled hours of Cameco. However, he took no more than 15 minutes per day for such matters and used his personal credit card and making such calls.

QUESTION:

Has Gedicke clearly breached his duty of loyalty? Explain.

STEP THREE:

BACKGROUND:

The Age Discrimination in Employment Act (ADEA) prohibits employers of 20 or more people from refusing to hire, paying less to, discharging, or otherwise discriminating against employees because of their age. Employment agencies are also covered by the act, as are labor unions, which are prohibited from excluding from their membership or otherwise discriminating against persons because of age. The protection given is to persons 40 years old and older.

HYPOTHETICAL:

General Dynamics and the United Auto Workers entered into a new contract that eliminated full health benefits for retirees under the age of 50. Before that, General Dynamics had to provide full health insurance for all retired employees who had 30 years of seniority. A class of employees aged 40-49 sued, arguing that the ADEA prohibited a loss of benefits based solely on age.

QUESTION:

Are they correct? Explain.