Exam 4 - Business Law

Spring 2026 - Bonney (Ch. 14,15,16,20)

Agency

Created when a person or company (agent) agrees to act for another person or company (principal) who provides the agent with authority to act

• Agent is subject to the principals direction and control

• Went may bind a principal to contracts with third parties as ongoing as they act within the scope of authority granted to them

• Principal is liable for agents actions

Universal Agent

Designated to do all acts that the principal can do legally

• Broad power of attorney (power to act on their behalf)

General Agent

Authorized to execute all transactions connected to a certain business or role

Special Agent

Authorized to represent the principal only for specific transactions and usually time limited

• Ex: Selling a piece of property for someone

Subagent

Authorized by the principal to work for an agent

• owing duties to both the principal AND the agent

• ex: real estate broker appointing a salesperson to show the house

Agency Creation Methods

Agreement : Oral or written

Implied -

• By ratification : Agent acting without authority but later approved

• By estoppel : Principals actions leading one to believe the agent had authority to act for them

• By operation of law : Automatic or due to legal relationship or necessity (parent to kid or emergency situation) - Necessity

Authority

Agents ability to transact business for a principal depends on scope of authority granted

Actual Authority

Express : Written or Spoken

Implied : Inferred from past actions or current position or job title

Apparent Authority

Principal creating an appearance of authority for an agent to a third party

Duties for Agency Parties

• Good faith and information sharing

Principals -

• Cooperate, compensate(indemnify), and reimburse

Agents-

• Loyalty, obedience and performance, reasonable care, accounting and notification

Disclosed Principals

Principal identity known by third party at the time the contract is entered with the agent, so principal is liable to the third party

Undisclosed Principal

Principal Identity unknown by the third party, and third party has no knowledge that the agent is acting for another, but principal is still liable to the third party.

• Agent is liable for the principals nonperformance

• Agent gets reimbursed by principal for nonperformance if it was within the agents authority

Agency Termination

• Agreement

• Agency Purpose fulfilled

• Principal or agent expires, or the subject matter of the agent is destroyed

Employer - Independent Contractor

Contracting with another person to do something but not controlled by them with respect to physical conduct, they control how the work is done

• Employer not liable for torts (Ex: Hiring a plumber)

Employer -

Employer - Employee

Employee under the direct control of the employer

• Employer is liable for employee torts within the scope of employment

• Have to withhold taxes, pay leave, and provide insurance and benefits → Sometimes misclassifications happen to avoid these costs

Contractor Classification Factors (2024 DOL)

1) Opportunity for profit or loss

2) Investment by parties

3) Work relationship permanency

4) Nature and degree of control over work

5) whether it’s an integral part of the employers business

6) Workers skill and initiative

Employment at will

Under American common law, employees work “at will”, meaning employees can discharge and employees and quit for any reason at any time

• Employees can be discharged for good cause, no cause, or even a morally wrong cause

Employment at-will limitations

• Contractual right to continued employment

• termination only for certain reasons or by certain procedures (contract)

• dismissals that violate a public policy

Common law exceptions :

• Refusing to commit illegal acts

• public duty

• public rights (workers comp filing)

• Whistleblowing complaint

Employment and Social Media

To minimize liability, companies can restrict unofficial social media endeavors by limiting who can and what can be posted on behalf of the company

Employer Tort Liability

Employee creating tort liability within the scope of employment

Scope of employment -

• In the same general nature as those authorized by the employer

• Whether the employee was authorized to be in the area when the act happened

• Whether the employee served the principle or employers interests

Vicarious Liability

Employer liable whether the conduct was authorized or not and if it was intentional or negligent, as long as it was within the scope of agency or employment

Principal tort liability

Liable for agent torts when -

1) principal gave faulty instructions to agent

2) principal negligently hired the agent

3) principal failed to properly supervise agent

Exculpatory Clause

Employer insisting the employees agree not to sue the employer for any tort action occurring in the workplace

Anti-raiding Covenant

Employer requiring employees to agree that they will not recruit fellow employees for another company when they leave

NDA - Non-disclosure Agreement

(non-disparagement clause)

Requires a party to keep certain information confidential and setting limits on how it can be used or shared

• Many states ban them from employment contracts and settlements

Non-compete Clauses

Ask employees to agree not to leave and take a position with a competitor for a certain time (usually 1-3 years)

Speak Out Act

Makes NDA’s unenforceable when they are used to silence individuals about sexual harassment or assault in the workplace

FTC Rule banning Non-competes

Adopted a broad rule in 2024 to ban all non-compete clauses in employment agreements

• Considered widespread and often exploitive by inhibiting people from changing jobs, suppressing wages, hampering innovation, etc.

• Opponents argue non-competes promote retention, promotions, and training

Substance Abuse

Affect : Safety, Productivity, and Medical-insurance costs

Drug Testing-

• Employers may prohibit possession, use, or being under the influence of alcohol or drugs in the workplace

• Drug tests can’t be imposed on union workers unless approved by union

Drug-Free Workplace Act

Requires companies doing more than $100,000 in business with the government to certify they are a drug-free workplace, prohibiting use, setting policies, and reporting

Omnibus Transportation Employee Testing Act

Requires drug and alcohol testing for employees in safety-sensitive transportation jobs, also testing after accidents

• Pilots, truck drivers, train operators, etc.

OSHA - Occupational Safety and Health Act (1970)

• Must provide a workplace “free from recognized hazards that may cause death or serious physical harm”

• Administration inspectors conduct inspections via administrative warrants (without probable cause)

• They can issue citations and fines

• The standards cover toxic substances

Workers Compensation

• Employers must pay insurance premiums for injury and death benefits for employees

• Provides income and medical recovery regardless of the cause of the work-related injury

• Employers are immune from damage suits from on-the-job accidents → except when the employer created the dangerous condition intentionally

FMLA - Family and Medical Leave Act

Applies to private employers with 50 or more employees and to all government employers

• Provides up to 12 weeks of unpaid, job-protected leave per year → After childbirth or adoption, caring for a seriously ill family member, or for own serious illness

• Liability for violations can be imposed on managers as well as the company

Paid Leave

Provide parental and family caregiving leave as well as temporary disability insurance to cover paid personal medical leave

• Enacted by 12 states and D.C.

• Some states have paid sick-time leave and 3 have paid leave for any reason

Hiring Legally

Must present documents to show identity and authorization

• Passport, Drivers License, School ID, Social security Card, or Birth Certificate

• I-9

• hiring unauthorized undocumented immigrants can result in fines

• Discriminating against authorized persons can result in penalties

Ban the Box

Requires employers to eliminate the question to a job application asking an applicants criminal history and reducing accessibility to criminal records until later in the application process

Fair Chance to Compete for Jobs Act (2019) :

Bans the box on applications for positions with federal agencies and private employees

Minimum Wage

Federal Minimum wages were initiated in 1938 under the FLSA

• The federal is $7.25, last set in 2009

• 45 states have it established, 33 are above

• Hourly workers get time and a half when working more than 40 hours

Occupational Licensing

Many occupations are subject to state and local licensing requirements

• 1/3 of all jobs in the U.S. require a license

• The purpose is to protect consumers and the public

• They’re often promoted by those int eh field to reduce supply, and push wages up

Plant Closing Warnings

WARN - Worker Adjustment and Retraining Notification Act : Requires employers with 100 or more employees to give advance notice of a closing or mass layoff (50 or more employees)

• Notice must be given 60 days in advance to employees and local government

Child Labor Laws

FLSA - Federal Fair Labor Standards Act (1938) :

• Prohibits the employment of minors in nonagricultural occupations under 14

• Restricts hours for minors under 16

• Prohibits hazardous occupations for minors under 18

Norris La-Guardia Act (1932)

Declared every worker has full freedom of association, organization, and designation of representatives to negotiate terms and conditions of employment

NLRA - National Labor Relations Act

Wagner Act : ensures workers the right to organize, form unions, and bargain collectively

Taft-Hartley Act : Changed federal policy away from encouraging unions to a more balanced approach

Landrum-Griffin Act : increased regulation of internal union affairs

NLRB - National Labor Relations Board

• Oversees the NLRA

• Prosecutes unfair labor practice

• Federal, state, municipal employees, supervisors, managers, independent contractors, and some agricultural workers are not covered

Unionization

Authorization cards signed by 30% or more workers triggers an election to form a union

• Certified to be exclusive collective bargaining agent if it gets more than 50% of the vote

• Workers who don’t join the union still have to pay agency fees, even those who voted against it are bound

Collective Bargaining

Process by which the employer and the union negotiate a labor contract setting forth the terms and conditions of employment for a set time

• Done on behalf of al employees

• Both must bargain in good faith

• Concerted activity like a union strike or employer lockout are allowed

Right-to-work laws

Prohibit the need to pay by people who didn’t join the union, some states have adopted this