A Legal Basis for Workers as Agents: Employment Contracts, Common Law, and the Theory of the Firm
AbstractThe purpose of this paper is to show that the common law governing the employment of labor makes the distinction not only between employee and independent contractor but also between managerial control and agency. The idea is that common law precedents govern workers who are employed and managerially controlled without the requirement that formal, written contracts be established, and that these defaults support the authority of management to direct their activities within the firm. However, many firm owners voluntarily restrict their ability to control workers by making them agents. Workers who are agents differ from workers who are managerially controlled in that in the former caseworkers are treated differently in the eyes of the common law and they often sign detailed, formal employment contracts. The typical features of formal employment contracts are examined. The principal conclusion is that formal employment contracts facilitate the granting of discretion to workers by superseding many of the legal defaults that define the relationship between the worker and firm owner.
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Bibliographic InfoPaper provided by EconWPA in its series Law and Economics with number 9705001.
Length: 30 pages
Date of creation: 01 May 1997
Date of revision: 04 Feb 2002
Note: Type of Document - Microsoft Word 2000; prepared on IBM PC pentium running WindowsNT; to print on HP; pages: 30; figures: none
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Employment contracts; managerial control; agency relations; common law; transaction cost economics;
Find related papers by JEL classification:
- K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
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