1.2 Agency and Liability in the Employment Relationship

Agency

Agency is a contract relationship (a legally binding agreement) between a principal and an agent whereby the principal, expressly or implicitly, authorizes the agent to work on his or her behalf and with the power to bind the principal. In the employment relationship, the employer is the principal and the employee is the agent. Both parties have an obligation to act in good faith to fulfill their obligations under the relationship. The employee has power to act as agent only to the extent authorized by the employer. This authority may be great or it may be very limited. If the agency relationship vests the employee with power to contract, the employer is responsible to third parties for the contract obligations entered into on its behalf by the agent.

Liability

Moreover, the employer can be exposed to liability in tort (a civil wrong which causes someone harm) for the acts or omissions of the employee. This is known as vicarious liability, a concept which grew out of the doctrine of respondeat superior – “let the master answer for the servant.” Under respondeat superior doctrine, an employer is only responsible for the employee action performed within the scope of employment.

Scope of Employment

Scope of employment involves employee conduct which is reasonably relative to a job description and foreseeable by the employer as part of that job description. Whether an employee is acting in the scope of his or her employment is not always an easy question to answer. However, the answer is very important to an employer because employers do not wish to be liable for employee behavior that has no relation to the goals of the employment relationship, e.g., furthering the employer’s business interests. Sometimes, in what may appear to be the scope of employment, an employee takes actions which further his or her own interests and not the employer’s. For example, an employee may pursue self-interest if he or she runs a personal errand while driving to a meeting at a company branch office. This type of departure from the employment relationship is known as frolic and detour. In such cases, if the employee’s departure from business purposes is substantial, an employer will not be vicariously liable, while if the deviation is minor, the employer may be. This doctrine does not apply to employees getting to and from work. The going and coming rule, as it is known, shields employers from the acts or omissions of employees while commuting to work. Sometimes an employee is conducting personal and employer business at the same time. In this case, the dual purpose mission of the conduct will subject the employer to liability for the actions of the employee.

As we shall see in later chapters, under the agency doctrine of vicarious liability, employers may be liable for the actions of employees who violate federal and state employment protections statutes and regulations. Therefore, it is important to understand when a person is acting as an employer or an employee.