Unit 4 · Representation and Labor - Orthelious/60350_F20 GitHub Wiki

Representation and Labor

The main focus of the unit will be on professional relationships—how do we define what our relationships are with the people we work with? Who can represent us and what are the implications for that relationship? How do we hire someone? In this unit we'll cover the concept of agency and how that builds out into the common practices of defining, hiring and managing a labor force.

Sections
Agency and Representation
Labor and Employment
Independent Contracting and Self-employment

Agency and Representation

This is the first of our chapters to focus on relationships. How do we define our relationship to other people when conducting business? Many of these answers can be found in the legal concept of Agency.

"The definition of agency law deals with agent-principal relationship and it's a relationship where one party has the legal authority to act in place of another." [Source: upcounsel.com](/Orthelious/60350_F20/wiki/Source:-upcounsel.com)(https://www.upcounsel.com/definition-of-agency-law)

Let's really emphasize that concept:

Where one person has the legal authority to act in the place of another.

The concept of agency guides us in answering some essential questions in business:

Does this person/company represent us? To what extent?
Are they our employee? Or are they an independent contractor?
Do I represent them? To what extent?
Am I an employee or an independent contractor?
How much power and control does this person/company have over my work? Over me?
What power can I exercise over others?
What laws do I have to follow? Do they have to follow?
How do we start a relationship? How long does it last? How can we end one?

Parts
Business Relationships
Defining Agency
The Essential Four Components of Agency Relationships

Relationships

How we interact with someone in our business can be boiled down to one word: relationships. Once we know our relationship to someone, we can understand what powers we grant them. Furthermore, we can understand what our responsibility is to them.

Essential Terminology

FIDUCIARY — A legal and/or ethical relationship of trust. A person in a fiduciary relationship is obligated to act in the best interest of another.
PRINCIPAL — The party who authorizes another (an agent) to act on their behalf. A principal could be an individual or a group.
AGENT — The party who is authorized to act on another’s (the principal) behalf. An agent can also be an individual or a group.
THIRD PARTY — Any person or party outside of the two primary parties (principal and agent).
EMPLOYEE — A person (agent) hired to perform duties on an ongoing basis for a principal (employer), whose work conditions and methods are strictly controlled by the principal.
INDEPENDENT CONTRACTOR — A person hired to perform limited, specific duties for a party according to a contract, for a specific period of time. The independent contractor's work conditions and methods are not strictly controlled by the principal.

The Agent Relationship

PRINCIPAL AND AGENT A party who conducts business on behalf of and in the interest of a principal.

This is our default starting point for agency. For any business relationship, the agent and principal should be clearly defined.

—The following relationships are the most common and are both types of the Agent/Principal relationship—

EMPLOYER AND EMPLOYEE An agent who works for a principal AND whose methods and working conditions are controlled by the principal.
PRINCIPAL AND INDEPENDENT CONTRACTOR A party who is contracted to do work for a principal, but whose methods and working conditions are not controlled by the principal.

These relationships can appear to be straightforward when you're talking about only two or three parties conducting a single piece of business—but few projects are limited to just a few parties.

Let's take a look at some examples of projects in creative practices that involve multiple, sometimes complex, relationships. For each of these examples, try to guess how many parties are involved and what their business structures could be. And what are their relationships of these parties to each other?

Defining Agency

Now that we've discussed the idea of a business relationship in general, we need to discuss agency, an important concept and area of law that guides us with regulations, best practices, and oversight for hiring and being employed by others.

What is agency?

AGENCY — A consensual relationship created by contract or by law where one party, the principal, grants authority for another party, the agent, to act on behalf of and under the control of the principal to deal with a third party.

An agency relationship is fiduciary in nature, and the actions and words of an agent exchanged with a third party bind the principal.

gandalf

Why is Agency Important?

Enhancement — You can augment your creative practice utilizing the skills and knowledge of others.
Representation — You can empower someone to carry out your wishes, who (should) have your best interests in mind.
Employment — The Understanding agency is an essential aspect of being an employee and/or employer and knowing whether someone is an employee or an independent contractor.

The Common Types of Agents

// GENERAL AGENT

Authorized to conduct every type of business for the Principal.

As we discussed in the Business Structures chapter, the Sole Proprietor is the default starting point. Much in the same way, a General Agent is the starting point for Agency relationships. Unless you further define the relationship with your agent, they are going to be a General Agent and empowered to conduct every kind of business for the Principal.

// SPECIAL AGENT

Authorized to conduct only specific business activities as outlined in a contract. There are rare cases where you want an agent to conduct EVERY kind of business. Agents are usually limited for a specific purpose. For example, A real estate agent helps you buy/sell a house, a lawyer represents you in legal affairs, an insurance agent for insurance claims.

These relationships are all spelled out in a Contract!

What kind of business would the following agents in creative practices conduct on your behalf?

A talent agent?
A gallery agent?
A record company representative?
A tour manager?
A studio manager?
A sales broker?

// AGENT WITH INTEREST

This agent possesses interest (owns or controls) some aspects of the Principal’s business.

This is an agent with some skin in the game. They will benefit personally from acting as an agent for your business. For example: If an agent representing a author's new book is also a contributing writer, their decision-making will be affected more so than if they had no ownership over the product.

What's a way that an Agent with Interest could be negative?

// SUBAGENT

An secondary agent who is representing both the primary agent and principal.

Sometimes an agent needs to bring in someone else they trust to get a job done. Think of a general contractor working on your house that may need to bring in a plumber. Or an appraiser that may bring in an expert on West African sculpture to determine how much a collector should spend on a particular piece. Or a film director who needs to employ a cinematographer to work on the movie you're producing.

These subagents work for both the agent and you (the principal). The key thing to remember here is that there is often a seperation of one or two people between you and the subagent—while this person should act on your behalf, messages can get lost or miscontrued.

C. The Four Essential Components of Agency Relationships

The are four essential components that help us determine what type and to what extent an agency relationships exists:

1. Formation

2.Control

3. Authority

4. Liability

FORMATION

How are agency relationships started? There are four primary, somewhat wonky, ways to form an agency relationship:

By Agreement: Both parties agree to a relationship by verbal or written agreement.
By Ratification: A third party sets up the relationship, and the agent and the principal agree. Think of this like matchmaking.

An example of this is the real estate website Zillow. When requesting to see a property, Zillow will act as the intermediary and set you up with a licensed Real Estate agent in order to view the property.
By Operation of Law: Agencies that are recognized by courts in the absence of a formal agreement. Think of family relationships—in an emergency, your parents or guardians would act as your agents.
By Estoppel: A second party gives a third party the impression that they are acting on behalf of the Principal—even though there is no established agent/principal relationship.

This one is extra sticky and hard to understand. I'm going to be honest that I struggle with this concept, but it's important to know about it's existence.
- "Agency by estoppel is still considered a legally binding agency relationship. This means that an individual or company cannot unofficially give someone the appearance of working on their behalf but then distance themselves from the consequences of that ostensible agent's actions. In other words, if a company supplies someone with office stationery, branded business cards, and an office in their building – in other words, giving them the appearance of being an official representative of the company – then they are liable for that person's actions on behalf of the company, including any loans or insurance policies they have issued." Source: insuranceopedia

CONTROL

What level of control does the Principal have over the Agent? This component is about to what extent does a Principal exercise control over an agent.

What is the scope of work or job duties for the agent?
How much direction and control does the principal exercise over the agent’s work?
Can the principal determine the agent’s working conditions?
Is the relationship exclusive?

AUTHORITY

What is the agent empowered to do? i.e. How much authority can an agent operate with on the Principal's behalf?

Two types:

Actual Authority — The principal assigns express or implied powers to the agent.
Apparent Authority — The principal, knowingly or mistakenly, permits an agent to act with authority they were never expressly granted. (This is where agency by estoppel could come into play.)

LIABILITY

Can you be held responsible for an agent's actions?

Certain agents are able to enter into legally binding agreements on your behalf.
You could also be held liable for an agent's conduct.

Let's take a look back at our examples from earlier in this chapter.

How would you now define the various agency relationships?

Labor and Employment

Parts
The Employer/Employee Relationship
Labor Law and the Rights of the Group
Employment Law and the Rights of the Individual
A Few Notes On Employment Ethics

The Employer/Employee Relationship

Why is understanding labor and employment law important to creative practices?

Why does understanding human resources and employment law matter? Whether you run a business yourself or work in one as an employee, you are governed by a set of (hard-won) rights and responsibilities. It doesn't matter what the industry is, we all have to abide by these rules.

The largest set of these laws and regulations apply to how employees are treated. Not fully understanding the implications of how you treat your employees (right or wrong) can be major. Likewise, it's important as an employee to understand your rights.

California Judge Orders Uber And Lyft To Consider All Drivers Employees

Bobby Allyn, NPR News
Ride-sharing apps Uber and Lyft have long classified their drivers as independant contractors and not employess, skirting requirements to adhere to labor and employment regulations. Now a California Judge has ordered the company to reclassify the drivers as employees, giving them access to the protections of Labor Law.

A working definition of "Employee"

EMPLOYEE — A person (agent) hired to perform duties on an ongoing basis for a principal (employer), whose work conditions and methods are strictly controlled by the principal.

The Employer/Employee relationship is one of the most common types of agency relationships. The employer (the principal) controls all the aspects of the employee(s)'s job.

This can include:

When the employee is paid and at what rate
What conditions (i.e. office or shop) they will work in
What tasks the employee must perform
What equipment the employee must use to complete their job

And many more...

What are some employer/employee experiences from your own life and creative practice?

Laws governing the Employer/Employee relationship

While an employer has a great deal of control over the employee's job, they do not have unlimited authority. All employers must adhere to two basic categories of US law when it comes to employment:

Labor Law — The set of laws pertaining to the groups of workers. These set of laws regulate unions and collective action. [source](/Orthelious/60350_F20/wiki/source)(http://www.gotnbc.com/Labor Law 101.pdf)
Employment Law — These laws regulate the rights of the individual worker.

It is essential to understand the basics of these laws and practices if you hope to hire and manage employees. In large groups situations (more than 50 people) like corporations, adherence to these laws and regulations is usually handled by a Human Resources manager or department. But for smaller businesses, this is usually handled by general management.

PLEASE NOTE: I am only covering federal laws. Each state has its own additional set of laws governing labor practices and regulations.

Labor Law and the Rights of the Group

In general, Labor Law references the area of law that governs how a group of employees must be treated and their right to collective action. Think of a factory, a farm, a museum, the production of a film—all require the efforts of a group of employees to succeed.

This is especially important in creative practices regarding the formation of, and how to work with, labor unions.

Some helpful definitions:

Labor Union — an organization of workers formed for the purpose of advancing its members' interests in respect to wages, benefits, and working conditions. [source](/Orthelious/60350_F20/wiki/source)(https://www.merriam-webster.com/dictionary/labor union)
Collective Bargaining — negotiation between an employer and a labor union usually on wages, hours, and working conditions. [source](/Orthelious/60350_F20/wiki/source)(https://www.merriam-webster.com/dictionary/collective bargaining)

Labor Laws and Regulations to be Aware of:

// The Fair Labor Standards Act

A federal law passed in 1938 that establishes a few key practices and regulations

The right to a minimum wage
The right to overtime pay when exceeding a 40-hour workweek
Prohibits most employment of minors

There are MANY additional acts that build on this law, further detailing the rights of the collective workforce. You can check out an abbreviated list here on wikipedia

// National Labor Relations Act

Established in 1935, this act effectively enshrines the rights of workers to form labor unions (and other types of organizing activities) and collectively bargain to improve working conditions and wages.

Employment Law and the Rights of the Individual

As a complement to Labor Law, we have employment law, which defines the rights of an individual worker and job applicants.

Employment law, generally, deals with the following issues for the individual worker:

Discrimination
Wrongful termination
Wages and pay equity
Taxation
Harassment
Right to privacy
Workplace safety
'Whistleblower' rights
Leave policies
Hiring processes

Want to take a deep dive on employment law and your rights? I've found the website FindLaw to be very helpful as a starting point: Employment Law and Human Resources

Some Key Laws and Regulations to Be Aware of:

// Title VII of the Civil Rights Act of 1964

Applies only to employers with 15 or more employees.
Prohibits employers from discriminating in the hiring process based on race, color, religion, sex, or national origin. [Source: FindLaw.com](/Orthelious/60350_F20/wiki/Source:-FindLaw.com)(https://smallbusiness.findlaw.com/employment-law-and-human-resources/employment-law-101.html)

// Americans With Disabilities Act

Defines a disability as a physical or mental impairment that substantially limits one or more major life activities.
Prohibits discrimination against a person with a qualified disability.
Provides that if an individual with a disability can perform essential functions with or without reasonable accommodation, that person cannot be discriminated against on the basis of their disability. [Source: FindLaw.com](/Orthelious/60350_F20/wiki/Source:-FindLaw.com)(https://smallbusiness.findlaw.com/employment-law-and-human-resources/employment-law-101.html)

// Age Discrimination in Employment Act

Prevents employers from giving preferential treatment to younger workers to the detriment of older workers.
Only applies to workers 40 years of age and older, and to workplaces with 20 or more employees.
Does not prevent an employer from favoring older employees over younger employees. [Source: FindLaw.com](/Orthelious/60350_F20/wiki/Source:-FindLaw.com)(https://smallbusiness.findlaw.com/employment-law-and-human-resources/employment-law-101.html)

// Fair Labor Standards Act

Provides regulation as to the duration of workdays, and breaks an employer must provide.
Governs applicable salary and overtime requirements set out by the federal government. [Source: FindLaw.com](/Orthelious/60350_F20/wiki/Source:-FindLaw.com)(https://smallbusiness.findlaw.com/employment-law-and-human-resources/employment-law-101.html)

// Family and Medical Leave Act

Provides that employers must allow employees to take up to a 12-week leave of absence for qualified medical purposes.
Stipulates that to qualify for the leave, the employee must have worked for the employer for 12 months and for 1,250 hours in the 12 months preceding the leave.
Preserves qualified employees' positions for the duration of the leave. [Source: FindLaw.com](/Orthelious/60350_F20/wiki/Source:-FindLaw.com)(https://smallbusiness.findlaw.com/employment-law-and-human-resources/employment-law-101.html)

Resources

Here are a few starting points, specifically from the creative practitioner point of view, for reading more about issues of wages and labor:

Here is a good book to keep on your shelf if you have employees:

Human Resources for the Non-HR Manager

A Few Notes On Employment Ethics

This portion of the lecture is essentially an op-ed by your instructor. As you create your own collaborations and businesses, I hope you will strongly consider the following ethical suggestions

// Be Open to Criticism to Invite Diverse Opinions

Diversity and inclusion should be a top priority for every company. It is my personal opinion that having the greatest variety of experiences, cultural and professional backgrounds, and perspectives build the greatest framework for success.

The way to get there is to create a healthy work environment for spirited, professional debate. The way to create a diverse and healthy workplace is to invite constructive criticism.

// Make the Rules Easy to Find

Employee handbooks are a great standard to adhere to. Post important policies in the break room. Review your policies annually with your employees. Workplace rules are important, but not everyone will automatically know them and all too often the rules are misinterpreted through rumor and gossip.

Do the work for your employees and make workplace policies easy to find.

// The Rules Should Apply to Everyone

My father, who has an MBA and worked in the corporate telecom world for 40 years, had an essential piece of advice when it came to managing employees:

"Just make sure you treat everyone the same."

Making special cases, bending the rules for personal friends, not establishing clear policies — this is what creates the perfect petri dish for resentment to grow. If you have employees, build the work culture that you want, but build it in such a way that policies protect your employees, empowers them, and create a level playing field.

Avoid a system that awards special favors or exceptions. This is what can lead to a "boys club" atmosphere or contribute to systemic discrimination.

// Some Rules Should Be Broken, Though

In contradiction to the last point, if you find a rule is creating an environment of disadvantage or discrimination—change the rule! Healthy workplaces are in a constant state of evolution and flux.

// Pay People Equitably.

Pay people what they're worth. If you can't pay them what they're worth—be honest and up front as to why before the work begins. Always have logic and reasoning behind pay rates.

And make sure that if they are doing the same work as another employee with the same skill level, that they receive the same pay.

// Document! Document! Document!

Anytime you have an issue with an employer or anytime you need to discuss a human resources related issue with an employee—write it down.

Keep good records of when you've reprimanded someone.
Keep good records of hiring and promotion processes.
Keep good records of what someone's job duties are.
Keep good records of annual performance reviews and evaluations.
Keep good records when you fire someone.
KEEP GOOD RECORDS, Y'ALL.

// Deal with Problems Immediately and Seek Professional Advice

Think of the last time you brought up an issue to your boss. I'm going to venture a guess that the longer it took for them to address it, the more it felt like they weren't taking you seriously.

Deal with problems immediately. If you don't know what to do, seek professional advice from a human resources professional or an employment law attorney.

// Internships

Ah... internships. It is my opinion that internships (unless you're receiving course credit) should be paid positions. If you want to volunteer your time and your skills for no pay—my advice is to get as much of an educational experience as possible. But if you're just fetching coffee for the boss and sitting at a front desk twiddling your thumbs—that is a job and you should be paid.

Independent Contracting and Self-employment

In brief, our goal here is to draw a distinction between a traditional employee and an independent contractor.

Not understanding this distinction can be one of the primary ways creative practitioners are taken advantage of.

A. Employee VS. Independent Contractor

As a reminder, an independent contractor is fundamentally different from an employee. The relationships are goverened by the agreement between the principal and the agent. The labor and employment laws we've covered do not apply.

Independent Contractors are also commonly referred to as freelancers and/or self-employed.

As a reminder of what an independent contractor is:

// INDEPENDENT CONTRACTOR— A person hired to perform limited, specific duties for a party according to a contract, for a specific period of time.

Their work conditions and methods are not strictly controlled by the principal, but by the terms of the contract.

An independent contractor is not (automatically) an agent in their relationship to the principal.

The keywords here are “independent”, "limited" and "contract".
This relationship is governed by the contract between the two parties and legal standards of contract law.

Understanding the Difference

It's not just whether or not a principal calls you an employee or an independent contractor. The relationship has to be defined and has to abide by a set of standards set out in US law.

The IRS gives us at least these three top-level tests to determine whether someone is an employee or an independent contractor:

1. Behavioral

Does the company control or have the right to control what the worker does and how the worker does their job?

If the principal is supplying the office, the equipment, sets your hours, etc — you are most likely an employee.
If you operate independently of the principal and determine for yourself how the job will be completed—you are likely a contractor.

2. Financial

Are the business aspects of the worker’s job controlled by the payer? (these include things like how the worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)

How, when and in what manner you are paid for a job is a major determining factor. We're going to cover this at a greater level of detail in future finance units.
Do you invoice the principal for pay (IC) or are you on payroll (Emp)?
Does the principal furnish all of the required tools for the job (Emp) or just some of them (IC)?

3. Type of Relationship

Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)?

If you are receiving employee-type benefits, you are likely an employee.
If you do not receive employee-type benefits, you are likely a contractor.
Additionally, the contract between you and the principal should expressly state as much. We will cover more of this in Unit C.

Will the relationship continue and is the work performed a key aspect of the business?

If yes, then you are likely an employee
If no and the relationship or key aspect of the business has a set end date — you are a contractor.

A3 — Consequences

There are a number of reasons, but the key ones are:

Independent contractors pay higher taxes.
Independent contractors do not have access to company benefit plans (like health insurance, retirement, etc).
Non-salaried Employees are able to claim overtime pay for work over 40 hours per week. Independent contractors cannot.
Most importantly, independent contractors do not have the protections afforded through labor and employment laws.