Business law Exam 3

Business Law Exam 3, uses lessons 13-18

Employment Relationship

voluntary arrangement between an employer and employee

employer

hires an employee to do certain work

employee

person hired to perform work, directed and controlled by the employer

independent contractor

employed by an employer but is not controlled as to how to perform the work
Employee rights and benefits may depend on whether they are employed full-time or part-time. They are only controlled by the contract.

Salary

a from of compensation usually for managerial or administrative services expressed in terms of a month or year

Wage

a form of compensation usually for skilled and unskilled labor expressed in terms of hours, weeks, or pieces completed

Common Law Doctrine of Employment-at-Will

the means by which both employers and employees dealt with employment situations. This doctrine provides for an employer to terminate and employee at any time for any reason, and an employee can terminate their employment at any time for any reason

1. Discharge in violation of law

2. Discharge in violation of established public policy

3. Discharge prohibited based on implied contract terms

4. Discharge prohibited because of wrongful employer acts (torts)

5. Discharge prohibited if not done in good faith

5 Discharge Exceptions

Discharge in violation of law

Certain laws prohibit termination at will, such as the civil rights act that prevents a discharge due to race, color, religion, sex, or national origin. OSHA prevents an employee from being fired for complaining that an employer has violated OSHA

Discharge in violation of established public policy

Many states prohibit an employer from firing an employee who refuses to do something illegal or violates public policy

Discharge prohibited based on implied contract terms

An implied contract is an agreement between an employer and employee that is not written down, but is understood from the company's actions, policies, or verbal assurances. If an employer fires an employee in a way that violates the terms of an implied contract, the employee may have a case for wrongful termination.

Discharge prohibited because of Wrongful Employer Acts (torts)

Prohibited firing based on the at-will doctrine if the employee can substantiate an abusive discharge procedure was used by the employer. This may then result in a lawsuit for intentional infliction of emotional distress, defamation, or fraud

Discharge prohibited if not done in good faith

courts have required just cause for termination and will not allow them when made in bad faith or caused by malice on the part of the employer

Employment contracts

can be in writing or oral and can exist for a fixed period of time or may be terminated for cause or under specified conditions. Frequently have clauses regarding confidentiality, compensation agreements, bonuses, arbitration

Union contracts

collective bargaining between an employer and a large number of employees has become common practice as unions negotiate employment contracts. Acts as the agent of the employees.

Collective Bargaining Agreement

the contract between the employer and the union representing the employees

1. duty to exercise care

2. duty to provide a reasonably safe place to work

3. duty to provide safe tools and appliances

4. duty to provide competent and sufficient employees for the task

5. duty to instruct employees

5 employer duties to the employee

1. job performance

2. business confidentiality

3. inventions

3 employee duties to the employer

1. worker’s compensation

2. unemployment compensation

3. occupational safety and health administration (OSHA)

4. immigration reform act

Statutory modifications to common law

Worker’s compensation

Laws allowing injured workers and their survivors to be compensated if injuries or death occur in the scope of their employment
Employees are entitled to benefits even if the employer is not negligent and/or the employee is negligent. Injured employees may also sue third parties who may be negligently responsible for their injuries.

Federal Unemployment Tax Act

• Requires employers to contribute to financing the administrative costs of federal and state unemployment compensation programs.

• States set requirements for unemployment programs while the federal government cooperates with the states in furnishing unemployment compensation.

• Individuals who are self-employed, on strike, or who voluntarily quit a job without cause are ineligible for benefits

Occupation Safety and Health Admisistration

Responsible for regulation and enforcement of safety and health matters for most employees. Requires employers to provide a safe and healthy workplace for employees through training programs and providing safety information

Immigration Reform Act

Federal legislation requiring employers check the immigration status of applicants to ensure they are either US citizens or documented noncitizens authorized to work in the US

Vicarious Liability

Liability the employer bears for the actionable conduct of a subordinate, associate, contractor, or employee based on the relationship between the parties

Direct Liability

Liability the employer bears for the injury or damages caused by an employee under certain circumstances

Doctrine of Negligent Employment

Employers have a duty to investigate the background of an applicant.

Wage and Tax Statement (W-2)

Provides gross earnings and income tax deductions for a calendar year. Employers are responsible for providing to each employee and required to withhold and remit those taxes to the applicable federal and state tax agencies.

1099 Miscellaneous Income Statement

The Employer is not required to withhold or remit any income taxes but must provide to the contractor. A copy of this statement must also be sent to applicable tax agencies.

1. Civil rights act

2. Fair Labor Standards Act

3. Age discrimination in employment act

4. American with disabilities act

4 Major Pieces of Federal Legislation

Civil Rights Act - Title VII

Prohibits discrimination on the basis of race, color, religion, sex, or national origin. Forbids discrimination in any aspect of employment.

Fair Labor Standards Act (FLSA)

Establishes minimum wage, overtime pay, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector

Age Discrimination in Employment act

Protects certain applicants and employees 40 years of age and older from discrimination on the basis of age in hiring, promotion, discharge, compensation, or terms, conditions, or privileges of employment.

Applies to all employers having 20+ employees

Americans with Disabilities Act (ADA)

Prohibits discrimination against the disabled in employment, public transportation, telecommunication services, and public accommodations and services.

Prohibits funeral establishments with 15+ employees form discriminating qualified individuals. Employer is required to make a reasonable accommodation to the known disability of a qualified applicant

Family and Medical Leave Act (FMLA)

Act entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons

Applies to employers that have 50+ employees in 20 or more workweeks in the current or preceding calendar year.

Patient Protection and Affordable Care Act

Obamacare, this legislation requires employers with 50+ employees to provide them with employee health insurance

Health Insurance Portability and Accountability Act (HIPAA)

Privacy Rule, establishes standards to protect an individuals medical records and personal health information. Strictly limits an employer’s ability to exclude coverage for pre-existing conditions other than for pregnancy

Covenants Not to Compete

A promise, usually in a safe-of-business, partnership, or employment contract - not to engage in the same type of business for a stated time in the same market as the buyer, partner or employer

Legal and enforceable if the territory and time restrictions are reasonable enough to protect the interests of the buyer/employee

1. specified period of time and defined territory

2. protect confidentiality

3. non-disclosure to prevent release of trade secrets

4. restrictions on employment outside the workplace

5. supported by consideration

stipulations of non-compete in employment contracts

Agency Relationship

Exists when one person (the principal) reaches an agreement with another person (the agent) who agrees to act on the Principal’s behalf and under the Principal’s control
Fiduciary relationship

Principal

the party who appoints another to serve as an agent

Agent

the party appointed by the principal to enter a contract on their behalf

Power of Attorney

an instrument granting someone authority to act as an agent for the principal. Revocable and automatically terminates upon the death or incapacity of the principal

1. general power of attorney

2. springing power of attorney

3. durable power of attorney

3 POA types

General Power of Attorney

A written instrument granting an agent broad powers to act for the principal. This POA ceases to exist upon the disability or incapacity of the principal

Springing power of attorney

a written instrument authorizing 1 person to act as an agent for another, effective only upon a certain event occurring. also called conditional power of attorney

Durable Power of Attorney

Provides the authority granted under a power of attorney will remain in effect even after the disability or incapacity of the principal

Medical Power of attorney

grants authority to act in matters of health and well-being

Limited power of attorney

for a very specific purpose, such as signing a legal document when the principal is not available to do so for themselves

Financial power of attorney

with respect to fiscal and monetary matters

1. agreement

2. ratification

3. necessity

4. operation of law

Creation of Agency relationship needs:

1. express authority

2. implied authority

3. apparent authority

3 types of authority of an agent:

express authority

authority of an agent stated in the agreement or contract that created the agency relationship. it may be oral or written. Authorized by appointment.

Implied authority

agent’s authority to do things in order to carry out express authority. Enables the agent to perform acts reasonably necessary to accomplish the purposes if the agency relationship.

Apparent Authority

subsequent authorization by the principals ratification.

Ratification

Approving an act which was executed without authority; electing to be bound by a voidable contract.

general agents

those who are given broad authority to conduct the principal’s business.

special agents

those authorized by the principal to execute specific acts

Loyalty
good faith
obedience
reasonable skill and diligence
accounting
information
fiduciary

Agents duties to principal

Compensation
reimbursement
indemnification
adherence to contract terms

Principals duties to agent

Loyalty and good faith

an agent must work solely for the benefit of the principal and not for the agent or a third party.

obedience

the agent must follow all lawful and clearly stated instructions from the principal. any deviation from those directions is a violation of the agents duties

reasonable skill and diligence

implied condition of an agency is that the agent will use reasonable diligence and skill performing their duties

accounting

the agent is responsible for keeping and making available to the principal. an account of a all property and funds received by or disbursed to others on behalf of the principal

information

the agent is required to notify the principal of all matters that come to their attention

fiduciary

involving trust with regard to the relationship between an agent and the principal

compensation

a principal must pay the agent compensation as provided for in the agency agreement. the agent is only paid when the contingency has been met.

reimbursement

the principal is obligated to reimburse the agent for any expenses the agent paid from their personal funds

indemnification

it is common practice in business matters and contracts to include a clause to protect the parties from certain liabilities. Means to hold harmless

adherence to contract terms

a principal must comply with the terms of contracts made by the agent so agency duties can be completed

1. original agreement

2. subsequent agreement

3. renunciation

4. revocation

termination by act of parties

termination by original agreement

if there is a date for the agency relationship to end, it automatically terminates on that date

termination by subsequent agreement

a principal and an agent can agree to end the agency relationship at any time

termination by renunciation

an agent has the power to renounce the agency relationship at any time; however, if the agent abandons the agency without just cause, they can be held liable for any loss or damages incurred by the principal

termination by revocation

a principal can revoke the authority of an agent with or without cause at any time. a revocation is considered a discharge. Must discharge for good reasons or compensation may be owed.

Agency coupled with an interest

A principal cannot unilaterally revoke the authority of the agent if the agent has a personal interest in the agency. The interest in this situation is called __________

Interest in the authority

Would exist when the principal and agent agree the agent will collect money from another personal and give it to the principal, but when the agent receives the money, the agent keeps the money as payment for a pre-existing debt with the principal

Interest in the subject matter

would exist when the agent has possession or control over the real property of the principal and has other legal rights in the same property

1. Subsequent illegality of subject matter

2. death or incapacity of either party

3. destruction of subject matter

4. bankruptcy of the principal

5. dissolution of corporation

termination by operation of law

sole proprietorships

one person owns all the assets of the business. Unlimited personal liability for all the activities undertaken by the business

Doing Business As (DBA)

Also called assumed name; Operating under a name different than that of the sole proprietor, the business name any have to be filed and registers with an appropriate level of government.

Management

a sole owner exercises unilateral control over management and operation of all business activities and operations

profits and losses

the sole owner is entitled to all the profits generated but also personally liable for all losses suffered by the business

taxation

the company itself is not required to file taxes, as profits or losses are reported by the owner on their personal tax return

Liability Exposure

the liability exposure for business debts and actions must be considered for a sole proprietorship. the owner and business are treated as one, meaning all assets of the business and all assets of the owner are open to claims for an injury or loss

partnerships

voluntary association of 2 or more people who have combined their resources to carry on a lawful enterprise for their joint profit.

uniform partnership act of 1977 (UPA Act)

this act is a model law intended to achieve uniformity in regulating the creation and operation of business partnerships in the US.

General Partner

Individual partner actively and openly engaged in the business and held to everyone as a prtner

limited partner

partner whose liability for the firm’s debts is limited to the amount of his or her investment.

Silent partner

partner who takes no active part in the management of a partnership but has capital invested.

secret partner

partner whose name is kept secret from the public. Partnerships can have one or more partners.

Tax pass-through

the partnership passes their income (or loss) through to the partners

1. be loyal and act in good faith

2. maintain records

3. exercise reasonable care and skill in all partnership matters

4. conformance of contract of partnership

5. inform

5 common partner duties and responsibilities

1. actively participate in the management of the business

2. inspection of financial data

3. contribution

4. withdrawal of advances and profits

4 rights of partners

1. contracts

2. torts

3. debts

3 areas a partner may have civil liability exposure

1. by acts of the parties

2. by operation of law

3. by court order

3 methods to dissolution of partnerships

Dissolution by acts of the parties

1. agreement

2. withdrawal or alienation

3. expulsion

Dissolution by court order

1. insanity

2. incapacity

3. misconduct

4. futility

Dissolution by operation of law

1. illegality

2. death

3. bankruptcy

Limited Liability Company

a hybrid form of business that combines features of both the corporation and partnership types. Provides limited protection to owners. Provides for pass through taxation

Articles of organization

identify basic information, such as the name the business will be conducted in and the name of the owners