University:
Indiana University Bloomington
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

412

Pages:

2
Author:

bratrochanter

Key Points on Agency Law, Employee Status, and Fiduciary Duty 1. Employee vs. Independent Contractor Distinction: o Importance in Liability: Whether someone is classified as an employee or an independent contractor affects the principal’s liability for torts and their obligations under employment laws, including discrimination protections, unemployment benefits, and workers' compensation. o Case Example: Eisenberg v. Advance Relocation:  Julianne Eisenberg argued she was an employee and thus covered under Title VII protections against workplace discrimination. The court applied the "Reid factors" to assess the employment relationship, focusing on:  Control Over Work: Advance controlled Eisenberg’s work assignments and schedule, indicating employee status.  Nature of Work: Her work of loading and unloading did not require specialized skills, which typically suggests employee status.  Payment Method and Business Integration: Eisenberg was paid hourly, another indicator of an employee. Her work was also directly related to Advance’s core business.  Outcome: The court concluded Eisenberg was an employee due to the degree of control Advance had over her work, thus allowing her claims under Title VII. 2. Agent’s Fiduciary Duties to the Principal: o Duty of Loyalty: Agents must act in the best interests of the principal, avoiding conflicts of interest and not using confidential information for personal gain. o Duty of Confidentiality: Agents cannot disclose or misuse a principal's confidential information, and this duty persists even after the agency relationship ends. o Case Example: ABKCO Music Inc. v. Harrisongs Music, Ltd.:  After representing George Harrison, Klein of ABKCO attempted to use Harrison's confidential information (royalty earnings) to negotiate for Bright Tunes’ copyright. The court held Klein in breach of fiduciary duty since he used privileged information from his prior role to benefit himself, affirming Harrison's claim for damages. 3. Preventing Breaches of Fiduciary Duty: o Non-Compete and Confidentiality Agreements: Principals often require agents to sign agreements that limit their ability to compete or disclose information after the agency ends, helping to protect proprietary business information. Legal Recourse: If an agent breaches their duty, the principal may terminate the agency, sue for damages, or seek injunctive relief to prevent further misuse of confidential information. 4. Agent’s Duty to Obey Instructions: o Agents are expected to follow the principal’s lawful and reasonable instructions as part of their duty to act within the scope of their authority. o Exceptions: An agent may refuse instructions that require illegal, unethical, or unprofessional actions (e.g., a sales agent refusing to misrepresent a product). Professionals, such as attorneys, may have additional ethical rules limiting their obedience to client instructions. o Understanding these principles is essential in business relationships where agents and employees operate on behalf of principals, as they define both legal obligations and protections.