Ch 10 - AGENCY
&
Ch 12 – EMPLOYMENT
Objectives
• Explain the roles and limitations placed on agents
• Discuss the liability of principals and agents
• Describe the fiduciary duty of agents and principals
• List appropriate process for disciplining and terminating
employees
• Create a list of best practices that reduce risk of employee
suing for unjust dismissal
• Discuss the role of unions in employment
• Outline the obligations of employers in providing a safe
work environment
• Consider the impact of criminal activity on business
Classification: General
Agency
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Agent: Someone who represents another
(principal) in dealings with third party
– May be an employee or an independent
contractor
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Usually involves entering into contracts
on behalf of another
– May instead include other services such as
filing documents or negotiation of
contract
Classification: General
Creation of Agency
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Classification: General
Created when principal grants authority to
agent to act on his/her behalf, usually by
contract
May be created gratuitously
May be inferred from conduct of parties
Authority
• Actual authority may be expressed or implied
– Expressed authority - When principal directly grants authority to agent
– Implied authority – Derived from expressed terms and surrounding
circumstances
• Apparent authority
– Principal does something to lead a third party to think agent has authority
– Third party can rely on representation
• Estoppel
– Prevents employer from denying someone has authority
– Where principal does something to lead a third party to reasonably believe
that the “agent” has authority to act, the principal cannot later deny such
authority
– Based on apparent authority
Classification: General
Ratification
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Where agent exceeds both actual and
apparent authority, principal is not bound
but may still ratify (creating a binding
contract)
– May ratify intentionally by expressly
ratifying
– May ratify inadvertently by principal
taking some benefit under agreement
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Grants retroactive authority
Restrictions on ratification
– Must have been possible to enter into
contract at time of ratification
– Must have been possible to enter into
contract at time agent purported to act
– Must ratify within reasonable time after
agent’s unauthorized conduct
Classification: General
Vicarious Liability
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When one person is held responsible for the torts
committed by another
Both principal and agent may be held responsible
Where agent is employee, there will be vicarious liability
if employee acting within scope of employment
Liability for agent that is independent contractor is more
restricted
– Principal only liable if tort causing injury took place during
actual exercise of authority granted
– Usually restricted to fraud and negligent misstatement
– If agent passed information on innocently, then only
principal who gave information is liable
Classification: General
Vicarious Liability
• May be imposed by statute
– Statute may impose liability on owner of a vehicle when
another has been given permission to use motor vehicle (either
expressly or implied)
Classification: General
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Agent – 3 Party Relationship
• Generally, third party has no claim against agent
• If agent has exceeded authority, third party can sue agent for
claiming authority not possessed (i.e. tort of “breach of
warranty of authority”)
• Undisclosed Principal
– When agent does not disclose she is acting as an agent or refuses to
disclose who the principal is, third party must sue the agent
– When identity of principal is learned, a (binding) choice must be
made as to which party to sue
– Contract for undisclosed principal is not binding if identity of
undisclosed principal is important
Classification: General
Agent – Principal Relationship
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Classification: General
Fiduciary duty – agent’s obligation to act in the
best interests of the principal
– Has duty of utmost good faith
– Cannot take personal advantage of
business opportunity
– Must disclose all conflicts of interest
– Must make full disclosure of all
information
– Must act only for one side in a transaction
– Must not make profit at expense of
principal
– Has duty of accounting
– Cannot take secret commissions
(criminal)
– Has duty to act competently
– Cannot delegate responsibilities (except
where based on certain industry practices)
End of Agency Relationship
• Actual authority normally ends when:
– job is finished
– agent receives different instructions
– employment or agency relationship is changed or ended
• Actual authority also ends when project becomes illegal or
the principal dies, goes bankrupt, or becomes insane
• Issue of apparent authority remains
– Best to avoid apparent authority from the start
– Where apparent authority exists, principal must notify customers
and suppliers who deal with agent when agency relationship ends
• Power of Attorney that continues after principal becomes
mentally incapacitated now possible
Classification: General
REVIEW VIDEO
 https://youtu.be/JD0jMCgAjv4
Classification: General
Employment
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Classification: General
Historically recognized as master-servant
relationship
Relationship now based on contract
Substantial amount of legislation as well
Specialized statutes deal with collective
bargaining and unionized workplace
Definitions of Employment
• Statutory tests limited to operation of specific statutes
• Control Test - Historical test to determine employment
– Independent contractors control their own hours and how they do the work
– Employees work under direction of employer and can be told what to do
and how to do it
• Organization Test
– If the individual is an integral and essential part of the organization, he/she
is an employee
– Independent contractor works for self
• Important to differentiate between agent and employee as
employers are vicariously liable for broader ranger of torts
committed within scope of employment
Classification: General
Obligations of Employer
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Employer must provide:
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Classification: General
Safe workplace
Appropriate direction
Tools where appropriate
Wages
Reimbursement for expenses
Any other requirements included in
employment contract, e.g. provide
medical insurance
Obligations of Employee
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Employee must:
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Classification: General
Be reasonably competent
Have the skills claimed
Be honest, punctual, loyal
Perform the work agreed to
Owe a fiduciary duty if manager or key
employee
Termination
Termination of an employment contract can occur in several ways
and can be initiated by EITHER party. An employment contract
can be ended through:-
A. Termination by Employer
B. Termination by Employee (quitting)
C. EXPIRING – eg a fixed term contract of 1 year
TERMINATION BY EMPLOYER
An employee’s contract can come to an end in 3 different ways:1. ‘Without Cause’
2. Just Cause/For Cause
3. Constructive Dismissal.
We will look at each of these in some detail.
Classification: General
Termination ‘Without Cause’
• This occurs where worker/employee is blameless
i.e. has given the employer NO reason/cause to
dismiss them.
• ‘Without cause’ termination happens because the
employer needs to make difficult decisions due to
market demand, loss of customers, merger of
business, closing a department, discontinuing
certain products, introduction of machinery to
replace workers, recession, need to cut costs.
• At law, any termination ‘Without Cause’ requires
the employer to GIVE NOTICE OF
TERMINATION (or pay in lieu).
Classification: General
How much ‘Notice’ is required
Calculation of the notice period takes into account 3 things:a) statute law
b) Common law and
c) contract of employment signed by the employee.
a) Statue Law - Employment Standards Acts establishes a minimum required notice (called ‘Statutory Notice
Period’).
b) Under common law, employer must give ‘reasonable notice’ of termination for a Without Cause termination.
– May give notice or pay in lieu of notice- and usually does give pay in lieu.
– Common Law ‘reasonable notice’ cannot be less than the MINIMUM statutory requirements - often employee will
receive much more.
c) If the employment contract contains terms related to termination (a called a contractual notice period), these
terms must be followed and will prevail over (replace) any common law notice period. ‘notice’ agreed in a contract
cannot be less than the MINIMUM statutory requirements.
Classification: General
Minimum Notice Required by Employment Standards Act
https://www.alberta.ca/termination-pay.aspx
See: Table 2. Employer notice period needed for length of employment
Notice period
Length of employment
1 week
More than 90 days but less than 2 years
2 week
2 years but less than 4 years
4 week
4 years but less than 6 years
5 week
6 years but less than 8 years
6 week
8 years but less than 10 years
8 week
10 years or more
Classification: General
Calculating Reasonable Notice at
Common Law
‘REASONABLE NOTICE’ AT COMMON LAW
How is it calculated? Take into account:• length of service,
• importance of job,
• Age of employee,
• likelihood of finding other employment, etc.
As a ‘Rule of Thumb’ for common law ‘reasonable notice’ is one month per year
of employment
Classification: General
Dismissal for Just Cause
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Classification: General
No notice of termination required if just cause
dismissal
Examples:
– Being dishonest with employer or acted
immorally
– Convicted of crime that interferes with ability to
perform job
– Disobeyed lawful instruction from employer
– Committed an actionable wrong on the job
– Lied on a resume
Incompetence
– Must clearly inform employee of shortcomings
and give him/her a chance to improve
– Should have regular evaluations
Unacceptable conduct
– May not constitute just cause unless very
serious
– Provide reprimand and counseling, etc.
– Should provide progressive discipline
Dismissal for Just Cause
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Inability to perform work
– Human rights legislation requires
employer to accommodate disabled
employees providing it doesn’t place
unreasonable burden on business
– If disability results in permanent
incapacity to return to work, employment
contract will be terminated due to
frustration
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Classification: General
Lack of work due to economic downturn
is not just cause for dismissal
What is Wrongful Dismissal?
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UMBRELLA TERM: is a general descriptor for a legal claim about
about ‘termination’. IT IS NOT A METHOD OF TERMINATION. A
claim for Wrongful Dismissal usually involves disputes over whether
or not adequate notice (or pay in lieu) was given or whether enough
circumstances existed to dismiss for cause.
If just cause is found to exist, (even if this takes account of other
circumstances found after termination), no notice (or pay in lieu) is
required
Where wrongful dismissal is claimed the remedy is often for the
monetary difference in notice received and notice that should have been
given
Any harm to the employee’s reputation during the process of dismissal
may increase damages awarded by a Court.
A claim for Wrongful Dismissal can also be about failure of the
employer to take into account (add) regular bonuses and benefits
Employee must make reasonable effort to mitigate losses
– Damages will be reduced by whatever employee makes during
notice period
Reinstatement usually not an option
– May be possible if breach of statute
– Often allowed under collective agreement
It is a general term so do not answer that a contract ends because of
wrongful dismissal
Classification: General
Constructive Dismissal
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Classification: General
‘Constructive’ means ‘as if’. or it amounts to dismissal
Occurs by unilaterally changing the employee’s contract
of employment. This is treated by the Law ‘as if’ the
contract has been terminated.
Can include demotion, transfer, or otherwise changing
conditions of employment.
Constructive Dismissal occurs when the employee will
QUITS due to this change in contract/working conditions.
Whether intentional or not, this is constructive dismissal
BY THE EMPLOYER.
Employee can sue for ‘wrongful dismissal’
Employee’s obligation to mitigate may require him/her to
take alternate position unless impractical
Employee Can Quit for Cause
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Classification: General
Employee may quit for cause meaning that the
employer is in breach of contract. Examples are:– Given dangerous or illegal instructions
– Not properly paid
– Put into dangerous situations
– Can no longer perform duties due to disability
or illness
– Any important term of employment contract
breached
Employee may Quit ‘Without Cause’
This is where the employee simply decided to stop working for their employer
perhaps because they have found a better opportunity elsewhere.
• Contract of employment may provide for employee to give the employer a prescribed
amount of notice. For senior employees this can be 1 month or 3 months – to give the
employer time to replace them.
• If no contract provision exists stating how much notice the worker must give then the law
requires that the employee must give ‘reasonable notice’
– Usually much less than employer is required to give unless employee has special role in
business
• Employee must honour all other employment obligations, work their notice period diligently.
Employee can be held be liable for any wrongful or inappropriate conduct when leaving e.g.
bad mouthing the employer, being toxic in the workplace, stealing corporate
products/secrets.
• Employee cannot take confidential information, customer lists, secret formulas, or practices.
• Employee cannot persuade customers to accompany employee to new business.
• Employee must comply with restrictive covenant in contract if reasonable.
Classification: General
Collective Bargaining
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Classification: General
Workers banded together in 19th century to fight poor
working conditions
Canadian Act modelled on the U.S. Wagner Act which
recognized right to organize collectively if supported by
majority of workers
Labour relations boards established to deal with disputes
General right for employees to be members of trade union
and bargain collectively
– Confirmed as a right under Charter of Rights and
Freedoms
– Management and some essential services excluded
If the required minimum percentage of workers have
signed up as members, union may apply to Labour
Relations Board for certification
Recognition disputes
– Reduced through certification process
Jurisdictional disputes
– Disputes between unions as to who will represent
new group of employees or who will perform
certain work
– Resolved by application to Labour Relations Board
Certification
• Once bargaining unit is identified and requisite number of employees
sign up, union applies to board for certification
– In some jurisdictions, with enough signatures, union can be certified without a
vote
– Most jurisdictions require a certification vote
• Once union is certified, employer must deal with union exclusively
• Any interference with certification process is an unfair labour practice
and prohibited
– Criminal offence to fire or intimidate anyone from becoming member and may
trigger automatic certification
• Employers have the right to comment on organization process and its
effects on business
• Employers may also join together for bargaining purposes
Classification: General
Bargaining
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Once certified, either party can serve notice to commence bargaining
Members of union must ratify collective agreement for it to be effective
Either party or the government can request mediation to assist with bargaining process
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Agreement must include certain terms:
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Not required to join union, but must pay dues and are subject to collective agreement
Check-off provision common
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Classification: General
Only members of union will be hired
Possible to have a Rand formula agreement
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Future employees must join union
Exception for those with religious objections
Contract may require a closed shop
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Any dispute during agreement (rights dispute) must be handled through a grievance process culminating in
arbitration
Strikes and walkouts illegal during agreement
Agreement must be at least one year in length
First contract can be imposed by labour relations board
Unions often insist on union shop clause
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No job action allowed during mediation
If unsuccessful, mediator will “book out”
Employer deducts union dues from pay
Job Action
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Only permitted during interest dispute
– Dispute over terms to be included in agreement
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Must have bargained in good faith; mediators must have
booked out; must serve notice to other side
Strike – employees withdraw services
Lockout – employer closes operations
Employer will try to keep business running using
management or replacement workers
Picketing
– Appear at job site attempting to persuade customers,
suppliers, and employees not to deal with employer
– Cannot attempt to prevent someone from crossing picket
line
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Classification: General
Trade unions must properly represent employees
Misc. Legislation
• Workers’ compensation
– Employers contribute to fund that works like insurance; pays if employee
injured or becomes ill on the job
– Establishes health and safety standards in workplace
• Employment insurance
– Both employer and employee contribute
– Benefits paid to unemployed workers
• Human rights
– Prohibits discrimination and harassment
• Employment standards
– Establish minimum standards for wages, notice, overtime, leaves, etc.
– Standards cannot be waived by contract unless higher standard is set
– Establish boards to hear complaints
Classification: General
Supervising Employees
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Important to establish good working
relationship with employees, including
clear policies
– Fair employment practices
– Education of employees and managers
– Fair disciplinary process
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Must know employee rights, including
right to due process
Need process of progressive discipline
– Identify problem employees
– Create documentation of evidence of
behaviour pattern (with records available
for subsequent litigation)
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Classification: General
Need regular evaluation reviews with
problems identified
Supervising Employees
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Classification: General
Shoplifting and employee theft
– Employee theft – Section 322 of Criminal
Code
– Employee mischief (e.g., sabotage) –
Section 430 of Criminal Code
– Fraud – Section 380 of Criminal Code
– Shoplifting by customers – also theft, but
usually involves lesser amounts
Shoplifting and employee theft (Continued)
– Detection and prevention of crime are
critical
• Must balance costs against losses
• Consider employee morale and
customer goodwill
– Must make employees aware of
surveillance to avoid violation of privacy
rights
– Employees must be well-trained to deal
with shoplifting
Supervising Employees
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Classification: General
Employee theft
– Must respect employee rights
– May use internal or police investigation
– Must have reasonable grounds to search
– Only police can get search warrant
– Must prove beyond a reasonable doubt to
prosecute
– May terminate employee for just cause
– Must not obstruct justice
Employee fraud
– Detection is vital
– Best to inform employees of surveillance;
privacy legislation varies by province
– Lawyers should be involved at first stage
(forensic audit)
– Must use great care in dealing with employee
termination, confidentiality, recovery of money,
etc.
– Criminal prosecution may be appropriate