Agency and Employment Law
Instructor: Robert Reimer
Agency and Employment Law
The following is a SWOT Analysis specifically developed for Davis Inc. Davis Inc., in its capacity as a commercial window treatment provider, frequently must engage in agency relationships, particularly those regarding independent contractors. Agency law overlaps employment law but has broader reach because agency relationships can exist outside of employer-employee relationships.Agency is when a principal in this case Davis allows an agent or agents to act on its behalf. Davis engages daily in several agency relationships but in this analysis, the focus will mainly address the independent contractor aspect versus the role of regular employees. For the purposes of this report, employees will be limited to regular full-time window treatment installers. Agency theory research frequently focuses on how much “control” or “authority” the exchange agreement should give the principal over the agent in different contexts (Tumbat & Grayson, 2016).
At Davis, agents and company employees often work side by side and do identical work. This sometimes lead to conflict because of the difference in pay and scheduling. The independent contractors usually receive higher wages because Davis does not have to contribute towards their Social Security, Medicare or Federal Unemployment Insurance. Independent contractors also do not participate in many company benefits such as 401K programs and health insurance.
Hiring independent contractors has been great for Davis, Inc. It allows Davis to meet its staffing needs without the cost of traditional employees such as training, office space and paid time off. Davis has the freedom hire labor as needed for specific projects and to reduce its workforce when its workload decreases.
While agency has been good overall for the company, it is not without flaws. Employees sometimes complain about the freedoms independent contractors have such as setting their own start and stop times that they are not privy to do. Independent contractors also have the freedom to accept or reject jobs. Also, employee morale among installers seems to have decreased as they installers take less time off to keep up with independent contractors. Another issue, is quality control, some independent contractors provide better services and are more reliable than others.Independent contractors sometimes act beyond their authority agreeing to scheduling and other things that a normal employee would refer to the office staff. “Principals are usually conceptualized as having authority or delegating authority but not usually as submitting to agents’ authority” (Tumbat & Grayson, 2016).Davis needs to rectify these issues by addressing it in writing in any contracts between Davis and current/potential installers.
Additionally, there are several laws to which Davis Inc., must adhere to avoid even the appearance of discrimination. These include but are not limited to the Title VII of the Civil Rights Act of 1964, the Equal Pay Act of 1963, the Age Discrimination in Employment Act of 1967, Title I and Title V of the Americans with Disabilities Act and the Civil Rights Act of 1991.
Title VII prohibits employment discrimination in regards to race, color, religion, sex, or national origin. The Equal Pay Act is a federal statute that protects both sexes from pay discrimination based on sex. It extends to jobs that require equal skill, equal effort, equal responsibility, and similar working conditions (Cheeseman, 2016). The Age Discrimination in Employment Act of 1967 (ADEA), protects individuals who are 40 years of age or older from discrimination in hiring, promotion and other facets of employment. Additionally, Title I of the ADA prohibits employment discrimination against persons with covered disabilities.The U.S. Equal Employment Opportunity Commission (EEOC) enforces these laws. EEOC also provides oversight and coordination of all federal equal employment opportunity regulations, practices, and policies.
Most of the laws are based on how many employees a company employs and since independent contractors are not employees, the use of independent contractors may exempt Davis Inc. from some of them.Only employees are covered under federal discrimination and harassment laws, not independent contractors. Employers also are not required to accommodate for and independent contractor’s disability. However, Davis should be aware that if its employees harass or discriminate against an independent contractor because of his race, the company can be liable under Section 1981 of the Civil Rights Act of 1866. The law protects minorities’ right to enter contracts, including an independent contractor’s agreement to perform work for a company.
In conclusion, they agency relationship for Davis Inc., is double edged sword. One of the strengths is the ability to have a work force only when and if necessary. “… giving agents authority over principals enables the relationship to benefit more from the agent’s expertise and to respond in a more coordinated way to changing and uncertain circumstances (Tumbat & Grayson 2016). In our case Davis Inc., can take on additional work using independent contractors, and have personnel to work on (or off) its premises without the financial burden of payroll taxes or being subject to many state and federal employment laws. The weaknesses include the fact that independent contractors are permitted to work for several different companies at a time. Davis has less control over the worker’s time, efforts, and loyalty versus the influence it exerts over its regular employees.
Cheeseman, Henry. Legal Environment of Business: Online Commerce, Ethics, and Global Issues, 8th Edition. Pearson Learning Solutions, 04/2016. VitalBook file.
Tumbat, G., & Grayson, K. (2016). Authority Relinquishment in Agency Relationships. Journal of Marketing, 80(3), 42-59 doi:10.1509/jm.12.039