BLAW2301 Exam III

Chapter 28: Agency Law

Current Event: Holden, an employee of Spectrum, was called out to a job at Thomas’ house. The next day, he shows up again, kills Thomas, and takes her credit card, jewelry, etc. He was prosecuted in a criminal case. Thomas’ family brings a civil lawsuit against Spectrum. Holden caused emotional damage to Thomas’ family. Should Spectrum be responsible for Holden’s actions?
Holden did not have any criminal records.
The company ran background checks.
He was on the clock during the time of her murder but not assigned to her house.
Prior to this, Holden had gone through a divorce and was facing financial issues.
After the killing, Spectrum issued a work order that Holden requested to go to Thomas’ house.
Case decision: A Dallas Jury awarded $1.15 billion primarily because of the forging of the work order.
Principal: A person who has someone else acting for him.
Agent: A person who acts for someone else
Agency Relationship: someone (the agent) agrees to perform a task for, and under the control of, someone else (the principal).
To create an agency relationship, there must be:
A principal
An agent
Who mutually consents that the agent will act on behalf of the principal.
Be subject to the principal’s control.
Thereby creating a fiduciary relationship.
Consent: To establish consent, the principal must ask the agent to do something, and the agent must agree.

All 3 are required to create an agency relationship.

Control: Principals are liable for an agent’s acts because they exercise control over that person.
A principal may be liable in tort for any harm the agent causes and also liable
in contract for agreements that the agent signs.
In addition, the principal is deemed to know any information that the agent knows or should know.
Fiduciary Relationship:
A fiduciary relationship is one of trust: The beneficiary places special confidence in the fiduciary who, in turn, is obligated to act in good faith and candor, doing what is best for the beneficiary, rather than acting in his own best interest.
Agents have a fiduciary duty to their principals.
In some cases, there may be fiduciary duty but no control.
A trustee of a trust must act for the benefit of the beneficiaries, but the beneficiaries have no right to control the trustee.
Therefore, that trustee is not an agent of the beneficiaries.
Consent is present in every contractual relationship, but that does not necessarily mean that the two parties are agent and principal.
Elements not required for an agency relationship:
Written Agreement: In most cases, an agency agreement does not have to be in writing. An oral understanding is valid, except in one circumstance—the equal dignities rule.
Equal Dignities Rule: According to this rule, if an agent is empowered to enter into a contract that must be in writing, then the appointment of the agent must also be written.
Formal Agreement: The principal and agent need not agree formally that they have an agency relationship.
They do not even have to utter the word agent. So long as they act like an agent and a principal, the law will treat them as such.
Compensation: An agency relationship need not meet all the standards of contract law.
For example, a contract is not valid without consideration, but an agency agreement is valid even if the agent is not paid.
Duty of Loyalty: An agent has a fiduciary duty to act loyally for the principal’s benefit in all matters connected with the agency relationship.
The agent has an obligation to put the principal first, to strive to accomplish the principal’s goals.
Outside Benefits: An agent may not receive profits unless the principal knows and approves.
Confidential Information: Agents can neither disclose nor use for their own benefit any confidential information they acquire during their agency. The info is kept secret after the fiduciary relationship ends.
Competition with the Principal: Agents are not allowed to compete with their principal in any matter within the scope of the agency business.
Conflict of Interest between 2 principals: Unless otherwise agreed, an agent may not act for two principals whose interests conflict.
Secret Dealing with the Principal: If a principal hires an agent to arrange a transaction, the agent may not become a party to the transaction without the principal’s permission.
Appropriate Behavior: An agent may not engage in inappropriate behavior that reflects badly on the principal. This applies even to off-duty conduct.
Duty of Obey Instructions: An agent must obey her principal’s instructions unless the principal directs her to behave illegally or unethically.
Duty of Care: An agent has a duty to act with reasonable care. In other words, an agent must act as a reasonable person would, under the circumstances.
Under some circumstances, an agent is held to a higher—or lower—standard than usual. An agent with special skills is held to a higher standard because she is expected to use those skills.
Gratuitous Agent: Someone not paid for performing duties. They have the power and right to quit whenever they want, irrespective of the agency agreement.
A gratuitous agent is held to a lower standard because he is doing his principal a favor and, as the old saying goes, you get what you pay for—up to a point. Gratuitous agents are liable if they commit gross negligence, but not ordinary negligence.
Duty to Provide Information: An agent has a duty to provide the principal with all information in her possession that she has reason to believe the principal wants to know. She also has a duty to provide accurate information.
Principal’s Remedies when the Agent Breaches a Duty:
Damages: The principal can recover from the agent any damages the breach has caused.
Profit: If an agent breaches the duty of loyalty, he must turn over to the principal any profits he has earned as a result of his wrongdoing. Some states allow punitive damages against disloyal employees.
Rescission: If the agent has violated her duty of loyalty, the principal may rescind the transaction.
Duty to Indemnify:
A principal must indemnify an agent for any expenses or damages reasonably incurred in carrying out his agency responsibilities.
A principal must indemnify an agent for tort claims brought by a third party if the principal authorized the agent’s behavior and the agent did not realize he was committing a tort.
The principal must indemnify the agent for any liability to third parties that the agent incurs as a result of entering into a contract on the principal’s behalf, including attorney’s fees and reasonable settlements.
Duty to Cooperate:
The principal must furnish the agent with the opportunity to work.
The principal cannot unreasonably interfere with the agent’s ability to accomplish his task.
The principal must perform her part of the contract.
If the principal or the agent is unable to perform the duties required under the agency agreement, the agreement terminates:
Either the agent or the principal fails to obtain (or keep) a required license.
The bankruptcy of the agent or the principal affects their ability to perform required duties.
Either the principal or the agent dies or becomes incapacitated.
The agent violates her duty of loyalty. Agents are appointed to represent the principal’s interest; if they fail to do so, there is no point to the relationship.
Changes in Circumstances: If these changes are significant enough to undermine the purpose of the agreement, the relationship ends automatically.
War
Loss or Destruction of Subject Matter
Effect of Termination: Once an agency relationship ends, the agent no longer has the authority to act for the principal. If she continues to act, she is liable to the principal for any damages he incurs as a result.
The agent loses her authority to act, but some of the duties of both the principal and agent continue even after the relationship ends:
Principal’s duty to indemnify agent.
Confidential Information
Liability: The principal is liable for the acts and statements of his agent if (1) the agent had authority or (2) the principal ratified the acts of the agent.
Authority: A principal is bound by the acts of an agent if the agent had authority.
Express Authority: The principal grants express authority by words or conduct that, reasonably interpreted, cause the agent to believe the principal desires her to act on the principal’s account.
Implied Authority: Unless otherwise agreed, authority to conduct a transaction includes authority to do acts that are reasonably necessary to accomplish it.
Apparent Authority: A principal can be liable for the acts of an agent who is not acting with authority if the principal’s conduct causes a third party reasonably to believe that the agent is authorized.
In the case of express and implied authority, the principal has authorized the agent to act. Apparent authority is different: The principal has not authorized the agent but has done something to make an innocent third party believe the agent is authorized.
Estoppel: No one may claim that a person was not his agent if he knew that others thought the person was acting on his behalf, and he failed to correct their belief.
Ratification: If a person accepts the benefit of an unauthorized transaction or fails to repudiate it, then he is as bound by the act as if he had originally authorized it. He has ratified the act.
If an agent acts without authority, the principal can decide later to be bound by her actions as long as these requirements are met:
The “agent” indicates to the third party that she is acting for a principal.
The “principal” knows all the material facts of the transaction.
The “principal” accepts the benefit of the whole transaction, not just part.
The third-party does not withdraw from the contract before ratification.
Intermediary Agent: Someone who hires subagents for the principal.
Subagents: Someone appointed by an agent to perform the agent’s duties.
When an agent is authorized to hire a subagent, the principal is as liable for the acts of the subagent as he is for the acts of a regular agent.
Agent’s Liability: The agent’s liability on a contract depends on how much the third party knows about the principal. Disclosure is the agent’s best protection against liability.
To avoid liability when signing a contract on behalf of a principal, an agent must clearly state that she is an agent and also must identify the principal.
Fully Disclosed: An agent is not liable for any contracts she makes on behalf of a fully disclosed principal. A principal is fully disclosed if the third party knows of his existence and his identity.
Unidentified Principal: In the case of an unidentified principal, the third party can recover from either the agent or the principal.
A principal is unidentified if the third party knew of his existence but not his identity. Also known as partially disclosed principal.
Undisclosed: In the case of an undisclosed principal, the third party can recover from either the agent or the principal. A principal is undisclosed if the third party does not know of his existence.
The principal is always liable, but the agent is only liable when the principal’s identity is unknown.
A third party is not bound to the contract with an undisclosed principal if (1) the contract specifically provides that the third party is not bound to anyone other than the agent.
(2) the agent lies about the principal because she knows the third party would refuse to contract with him.
Unauthorized Agent: If the agent has no authority (express, implied, or apparent), the principal is not liable to the third party, and the agent is.
Principal’s Liability: An employer is liable for physical torts negligently committed by an employee acting within the scope of employment.
Respondeat superior: A Latin phrase meaning “let the master answer”.
There are two kinds of agents: (1) employees and (2) independent contractors.
Generally, a principal is liable for the physical torts of an employee but is not liable for the physical torts of an independent contractor.
However, there is one exception to this rule: A principal is liable for both the negligent and intentional physical torts of an independent contractor if the principal has been negligent in hiring or supervising her.
The more control the principal has over an agent, the more likely that the agent will be considered an employee.
When determining if agents are employees or independent contractors, courts consider whether:
The principal supervises the details of the work.
The principal supplies the tools and place of work.
The agents work full-time for the principal.
The agents receive a salary or hourly wages, not a fixed price for the job.
The work is part of the regular business of the principal.
The principal and agents believe they have an employer–employee relationship.
The principal is in business.
Gig Economy: The gig economy is based on companies that, instead of hiring full-time employees, use mobile apps to facilitate peer-to-peer transactions that pay per job.
Multiple states have passed laws providing that gig workers are indeed independent contractors.
The federal Department of Labor has proposed a new rule providing that workers who have substantial control over both the conditions of their work and its profitability are independent contractors, not employees.
- The National Labor Relations Board has ruled that Uber workers are independent contractors and therefore cannot unionize.
Proposition 22: This Proposition provides that app-based drivers are not employees but instead a special type of independent contractor with the right to some limited minimum wage protection, accident insurance, disability payments, and death insurance. It also limits the number of consecutive hours they can work.
An employee is acting within the scope of employment if the act:
Is one that employees are generally responsible for,
Takes place during hours that the employee is generally employed,
Is part of the principal’s business,
Is similar to the one the principal authorized,
Is one for which the principal supplied the tools, and
Is not seriously criminal.
The Scope of Employment cases raises two major issues: authorization and abandonment.
Authorization: An act is within the scope of employment, even if expressly forbidden if it is of the same general nature as that authorized or if it is incidental to the conduct authorized.
In authorization cases, the agent is clearly working for the principal but commits an act that the principal has not authorized.
Abandonment: The principal is liable for the actions of the employee that occur while the employee is at work, but not for actions that occur after the employee has abandoned the principal’s business.
*A principal is not liable for the intentional physical torts of an employee unless (1) the employee intended to serve some purpose of the employer or (2) the employer was negligent in hiring or supervising this employee.*
Frolic: principal is not liable; the agent is responsible.
Vicarious Liability: principals are responsible for the acts of their agents.
Agents are always liable for their own torts. Agents who commit torts are personally responsible, whether or not their principal is also liable. Even if the tort was committed to benefit the principal, the agent is still liable.
Indemnification: The principal can sue the agent, if the injured party recovers from the principal.
Nonphysical Torts: They hurt only reputation, feelings, or wallet. Nonphysical torts (whether intentional or unintentional) are treated like a contract claim: The principal is liable only if the employee acted with express, implied, or apparent authority.

Chapter 29: Employment and Labor Law

Family and Medical Leave Act (FMLA): Guarantees both men and women up to 12 weeks of unpaid leave each year for childbirth, adoption, or a serious health condition of their own or in their immediate family. US is the only industrialized nation that doesn’t require employers to offer paid sick leave.
Employee at Will: A worker without an employment contract. They could be fired for a good reason, a bad reason, or no reason at all.
Wrongful Discharge:
Violating Public Policy: An employer may not fire a worker for a reason that violates basic social rights, duties, or responsibilities.
Refusing to violate laws: As a general rule, employees may not be discharged for refusing to break the law.
Exercising Legal Rights: As a general rule, an employer may not discharge a worker for exercising a legal right if that right supports public policy.
Supporting Societal Values: Courts are sometimes willing to protect employees who do the right thing, even if they violate the boss’s orders.
Promises Made During the Hiring Process: Promises made to job applicants are generally enforceable, even if not approved by the company’s top executives.
Employee Handbook creates a contract.
Covenant of Good Faith and Fair Dealing: This covenant requires both parties to behave reasonably, making an honest effort to meet both the spirit and letter of the contract.
Qualified Privilege: Employers who give references are liable only for false statements that they know to be false or that are primarily motivated by ill will.
Tort Law Theories: Workers have successfully sued their employers under the following tort theories.
Defamation: Employers may be liable for defamation when they give false references about an employee.
More than half of the states recognize a qualified privilege for employers who give references about former employees.
Workplace Bullying: If a worker’s behavior is particularly extreme and outrageous, employers may face liability under the tort of intentional infliction of emotional distress (discussed in Chapter 8 on intentional torts).
Generally, courts have held that employers do not have a legal obligation to disclose information about former employees. But, in the case of violence, courts are divided.
States like Connecticut and Oregon have passed laws that require employers to:
Provide 14 days’ notice of work schedules.
Pay workers extra for each shift canceled on short notice.
Pay extra for split shifts.
Avoid retaliating against workers who ask for changes in their work schedules.
Whistleblowers: They are employees who disclose illegal behavior on the part of their employer.
False Claims Act: A statute that permits whistleblowers to bring lawsuits against anyone who defrauds the government and prohibits an employer from retaliating against workers who file suit under this statute. Punitive is shared between WB and Govt.
Sarbanes-Oxley Act of 2002: This act protects employees of publicly traded companies who provide evidence of fraud to investigators (whether in or outside the company).
The Dodd-Frank Wall Street Reform and Consumer Protection Act: Anyone who provides information to the government about violations of securities or commodities laws is entitled to a payout of from 10 to 30 percent of whatever award the government receives, provided that the award tops $1 million.
Constitutional protection for government employees:
Employees of federal, state, and local governments have a right to free speech under the U.S. Constitution.
Therefore, the government cannot retaliate against public employees who blow the whistle if the employee is speaking out on a matter of public concern.
Statutory protection for federal employees: The Civil Service Reform Act and the Whistleblower Protection Act prevent retaliation against federal employees who report wrongdoing. The WB is paid back attorney fees and backpay.
State Laws: All 50 states have laws that protect whistleblowers from retaliation by their employers, but the scope of this protection varies greatly from state to state. Most courts prohibit the discharge of employees who report illegal activities.
Off-Duty Activities: In the absence of a specific law to the contrary, employers do have the right to fire workers for off-duty conduct.
Lifestyle Laws: A few states, such as California, have passed lifestyle laws that protect the right of employees to engage in any lawful activity or use any lawful product when off duty.
Smoking: In roughly 60 percent of the states, however, employers cannot prohibit workers from smoking.
As a result, several thousand employers, including Union Pacific and Alaska Airlines, simply refuse to hire those who light up.
Alcohol and Drug Use: Under federal law, private employers are permitted to randomly test job applicants and workers for alcohol and illegal drugs.
Equal Employment Opportunity Commission (EEOC): The federal agency charged with enforcing federal employment laws, permits employers to fire or refuse to hire workers for using prescribed drugs only if that use creates a safety issue.
The Right to Free Speech:
National Labor Relations Act: Non-unionized workers cannot be fired for complaining about their jobs, so long as these complaints are shared with other employees and are not inappropriately hostile or violent.
the NLRA also protects all employees:
who engage in collective activity
relating to work conditions and
who are not supervisors.
Social Media Policies: These policies violate the NLRA if they unreasonably limit employee speech about work conditions.
Privacy on Social Media: The Stored Communications Act (SCA) prohibits unauthorized access to electronic communications, which includes email, voice mail, and social media.
However, an employer has the right to monitor workers’ electronic communications if:
the employee consents,
the monitoring occurs in the ordinary course of business, or
in the case of email, if the employer provides the computer system.
Under the Employee Polygraph Protection Act of 1988, employers may not require, or even suggest, that an employee or job candidate submit to a lie detector test except in the following cases:
An employee who is part of an “ongoing investigation” into crimes that have already occurred.
An applicant applying for a government job; or
An applicant for a job in public transport, security services, banking, or pharmaceutical firms that deal with controlled substances.
Workplace Safety:
Occupational Safety and Health Act (OSHA): Passed in 1970 to ensure safe working conditions.
General duty: Employers are under a general duty to keep their workplace “free from recognized hazards that are causing or are likely to cause death or serious physical harm” to employees.
Specific health and safety standards: Employers must comply with specific health and safety standards such as those that protect workers from respiratory hazards at work.
Records: Employers must keep records of all workplace injuries and accidents.
Oversight: The Occupational Safety and Health Administration (which is also known as OSHA) may inspect workplaces to ensure that they are safe.
Guns: Employers have the right to prohibit guns in the workplace but, in almost half the states, Bring Your Gun to Work laws prevent companies from banning firearms in their parking lot.
Financial Protection: Congress and the states have enacted laws designed to provide employees with a measure of financial security.
The Fair Labor Standards Act of 1938(FLSA) regulates wages and limits child labor.
The FLSA also prohibits “oppressive child labor,” which means that children under age 14 may work only in agriculture, entertainment, a family business, babysitting, or newspaper delivery.
Workers’ Compensation: Workers’ compensation statutes ensure that employees receive payment for injuries incurred at work.
Health Insurance: Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), former employees must be allowed to continue their health coverage for 18 months after leaving their jobs. Applies to companies having 20+ workers.
Social Security: The Social Security system pays benefits to workers who are retired, disabled, or temporarily unemployed and to the spouses and children of disabled or deceased workers.
The Federal Unemployment Tax Act (FUTA) is the part of the Social Security system that provides support to the unemployed.
A worker who quits voluntarily or is fired for just cause is ineligible for unemployment benefits.
Pension Benefits: The Employee Retirement Income Security Act (ERISA) protects workers covered by private pension plans.
National Labor Relations Act: The NLRA ensures the right of workers to form unions and encourages management and unions to bargain collectively and productively.
Section 7: guarantees employees (except supervisors) the right to:
Organize and join unions,
Bargain collectively through representatives of their own choosing, and
Engage in other concerted activities.
Section 8: prohibits employers from engaging in the following unfair labor practices (ULPs):
Interfering with union organizing efforts,
Dominating or interfering with any union,
Discriminating against a union member, and
Refusing to bargain collectively with a union.
Section 8 prohibits unions from engaging in these ULPs:
Interfering with employees who are exercising their labor rights,
Causing an employer to discriminate against workers as a means to strengthen the union, and
Charging excessive dues.
The NLRA also established the National Labor Relations Board to administer and interpret the statute and to adjudicate labor cases.
Organizing a Union: Under §9 of the NLRA, a validly recognized union is the exclusive representative of the employees. A bargaining unit is a “group of employees with a clear and identifiable community of interests.”
Organizing Process:
Campaign: Union organizers talk with employees and try to persuade them to form a union.
Authorization Cards: Union organizers ask workers to sign authorization cards, which state that the particular worker requests the specified union to act as her sole bargaining representative.
Petition: Assuming that the employer does not voluntarily recognize a union, the union generally petitions the NLRB for an election. Must be signed by 30% of workers.
Election: The NLRB closely supervises the election to ensure fairness. All members of the proposed bargaining unit vote on whether they want the union to represent them.
Collective Bargaining Agreement (CBA): A contract between a union and a company.
The NLRA permits the parties to bargain almost any subject they wish, but it requires them to bargain wages, hours, and other terms and conditions of employment.
The union and the employer are not obligated to reach an agreement, but they are required to bargain in good faith.
Concerted Action: Tactics taken by union members to gain a bargaining advantage. The NLRA guarantees the right of employees to engage in concerted action for mutual aid or protection.
Types of Concerted Actions:
Strikes: The NLRA guarantees employees the right to strike but with some limitations.
No-Strike Clause: A clause in a CBA that prohibits the union from striking while the CBA is in force.
A strike is illegal in these situations:
Cooling-Off Period: Before striking to terminate or modify a CBA, a union must give management 60 days’ notice.
Statutory Prohibition: Many states have outlawed strikes by public employees. This is to ensure that unions do not use public health or welfare as a weapon to secure an unfair bargaining advantage.
Sit-Down strike: Members stop working but remain at their job posts, blocking replacement workers. This is illegal!
Partial Strikes: A partial strike occurs when employees strike intermittently, stopping and starting repeatedly. A union may either walk off the job or stay on it, but it may not alternate.
Economic Strike: An economic strike is one intended to gain wages or benefits. During an economic strike, an employer may hire permanent replacement workers.
After a ULP strike, union members are entitled to their jobs back, even if that means the employer must lay off replacement workers.
- Picketing: The goal of picketing is to discourage employees, replacement workers, and customers from doing business with the company.
  - - Picketing the employer’s workplace in support of a strike is generally lawful.
    - Picketing is legal as long as no physical force is used to prevent people from crossing the line.
Secondary Boycott: A secondary boycott is a picket line established not at the employer’s premises but at a different workplace. It is generally illegal.
Lockout: Management is prohibiting workers from entering the premises and earning their paychecks. By withholding work and wages, the company hopes to pressure the union to bargain less aggressively. Most lockouts are legal.

Chapter 30: Employment Discrimination

Fifth Amendment: Prohibits the federal government from:
Depriving individuals of “life, liberty, or property” without due process of law.
Fourteenth Amendment: Prohibits state governments from:
Violating an individual’s right to due process and equal protection.
Equal Pay Act (1963): Employees may not be paid at a lesser rate than employees of the opposite sex for equal work.
Equal work: tasks that require equal skill, effort, and responsibility under similar working conditions.
Civil Rights Act of 1866: Meant to provide freed slaves with the same rights as white citizens.
Has been interpreted to prohibit racial discrimination in both public and private employment.

Medical Clinician: Martha and the newly hired male physician were performing the exact same job, but he gets paid more. She won the case based on the Equal Pay Act and was awarded $150,000.

Title VII of the Civil Rights Act of 1964
Illegal for employers with 15 or more employees to discriminate based on race, color, sex, or national origin.
Later, it also expanded to include pregnancy.
Adverse employment action:
Equal Employment Opportunity Commission: agency responsible for enforcement of Title VII
4 Types of illegal activity
Disparate treatment
Step 1: plaintiff must argue that they are similarly situated but are treated differently.
Belong to a protected category.
Suffered adverse employment action.
There has to be some indication of discrimination.
Prima facie: something that appears true upon first look.
Step 2: the employer must present evidence that the decision was based on legitimate, non-discriminatory reasons.
Step 3: To win, the plaintiff must now prove that the employer intentionally discriminated (shifting justifications)
Disparate impact (poses as non-discriminatory but impacts one group more than the other)
Step 1: Plaintiffs must present prima facie case.
Step 2: the defendant must offer some evidence that the employment practice was a job-related business necessity.
Step 3: To win, the plaintiff must now prove either that the Employer’s reason is a pretext or that other, less discriminatory, rules would achieve the same results.
Hostile environment
Sexual harassment - Unwelcome sexual advances
Requests for sexual favors
Severe verbal or physical conduct of a sexual nature that interferes with an employee’s ability to work.
Categories:
Quid pro quo: one thing in return for another
Hostile work environment
Prohibited activities prove a hostile work environment.
Same-sex harassment
Employer liability for sexual harassment
The company is also liable for the employee’s conduct.
Based on race, color & national origin
Retaliation: an employer has done something that would deter a reasonable worker from complaining about discrimination.
Seen someone go through something and does not want to be in the same situation.
Religion: employers cannot discriminate against a worker because of their religious beliefs
If an employee asks for an accommodation because of their religious beliefs, the employer must give it unless it is an undue burden.
Sex: Gender must be irrelevant to employment decisions
Family responsibility: parenthood is a protected category under Title VII.
Sexual orientation: Half the states and hundreds of cities have statutes that prohibit discrimination based on sexual orientation.
Gender Identity: Discriminating against someone for being transgender is a violation of Title VII.

Shannon Phillips worked for Starbucks for 13 years and worked her way up to become an area manager. In April of 2018, she had a day off. In one of the stores, two black men entered and sat down to wait for another man. When the server asked if they wanted something, they declined and said they were waiting for another friend. They were arrested. Less than a month after the arrest, they fired Shannon Phillips. She was working to make Starbucks more inclusive and welcoming. She claims that she was fired because she was white and the Starbucks was trying to bring a more diverse team. She was awarded $25.6M in punitive and $2.7M in damages.

Defenses to charges of discrimination:
Merit
Defendant is not liable if they show that the person, they favored was the most qualified.
Seniority, the legitimate seniority system is legal.
Bona fide occupational qualification (BFOQ):
The employer is permitted to establish discriminatory job requirements if they are essential to the position in question.
Employers consider customer preference in such situations:
Safety
Privacy
Authenticity
Age
Affirmative Action: The goal is to remedy the effects of past discrimination.
Pregnancy Discrimination Act: An employer may not fire, refuse to hire, or fail to promote a woman because she is pregnant.
Age Discrimination and Employment Act (ADEA): An employer with 20 or more may not fire, refuse to hire, fail to promote, or otherwise:
Reduce a person’s employment opportunities because they are 40 or older.
Plaintiff can show discrimination in:
- - Disparate treatment
  - Disparate impact
  - Hostile work environment
The Rehabilitation Act of 1973: Prohibits discrimination on the basis of disability by:
Executive branch of the federal government
Federal contractors
Entities that receive federal funds
Americans with Disabilities Act (ADA):
Prohibits employers with 15 or more workers from discriminating on the basis of a disability.
Disabled Person: Someone with a physical or mental impairment that substantially limits a major life activity.
Someone who is regarded as having such an impairment.
Accommodating the disabled worker: Reasonable accommodation - Employers are expected to:
Make facilities accessible.
Permit part-time schedules.
Acquire or modify equipment.
Assign a disabled person to an open position that he can perform.
Can perform essential functions.
Accommodations are not reasonable if it would create undue hardship for the employer.
Genetic Information Nondiscrimination Act: Employers with 15 or more workers may not require:
Genetic testing or discrimination against workers because of their genetic makeup.
Health insurers may not use such information to decide coverage or premiums.

Chapter 31: Starting a Business: LLCS and Options

Sole Proprietorship: A sole proprietorship is an unincorporated business owned by one person. A sole proprietorship is a flow-through tax entity.

Advantages:
Easily formed.
Taxes

Disadvantages:
Personal Liability
Limited Capital (Limited Financing options)

flow-through tax entity: An organization that does not pay income tax on its profits but instead passes them through to its owners who pay personal income tax on all business profits; also called pass-through.
Corporations: Corporations are the dominant form of organization for a simple reason—they have been around for a long time and, as a result, they are numerous and the law that regulates them is well developed.
Stocks can be bought and sold making investments easy to get.
Limited Liability Companies (LLC): An LLC provides the limited liability of a corporation with the tax status of a flow-through entity. LLCs have an oral operating agreement.
Wyoming passed the first LLC statute in 1977, but most states did not follow suit until after 1991.
Social Enterprises (SEs): These organizations pledge to behave in a socially responsible manner even as they pursue profits.
They aren’t non-profits and are not required to maximize shareholder returns but may instead trade off profitability for social responsibility, in the process benefiting their stakeholders.
Their focus is on the triple bottom line: “people, planet, and profits.”
To comply with the Model Benefit Corporation Act, an organization must:
State in its charter that it is a benefit corporation,
Obtain approval of its charter from two-thirds of its shareholders,
Measure its social benefit using a standard set by an objective third party (although its compliance with this standard need not be audited by a third party), and
Prepare an annual benefit report assessing its performance in creating a public benefit.
Partnership: An unincorporated association of two or more co-owners who operate a business for profit. Each co-owner is called a general partner.
A partnership is a flow-through tax entity. Partnerships are made because they’re easy to form.
Liability: Each partner is personally liable for the debts of the enterprise whether he caused them or not.
Management: In the absence of a partnership agreement that provides otherwise, all partners in a firm have an equal right to share in management.
Raising Capital: The capital needs of the partnership must be provided by contributions from partners or by borrowing.
Transfer of Ownership: A partner cannot sell his share of the organization without the permission of the other partners. Only the value of partnership interest can be transferred not the interest itself.
Dissociation: When a partner leaves a partnership. The partnership can either buy out the departing partner(s) and continue in business or wind up the business and terminate the partnership.
Limited Liability Partnerships (LLP): A limited liability partnership (LLP) has the limited liability of a corporation and the tax status of a flow-through organization.
Partners are not liable for the debts of the partnership but, naturally, they are liable for their own misdeeds.
To form an LLP, the partners must file a statement of qualification with state officials. LLPs must also file annual reports.
Professional Corporations:
If a member of a PC commits malpractice, the corporation’s assets are at risk, but not the personal assets of the innocent members.
All shareholders of the corporation must be members of the same profession.
Like other corporations, the required legal technicalities for forming and maintaining a PC are expensive and time-consuming.
Tax issues are much more complicated than for an LLC or LLP.
Joint Ventures: A joint venture is a partnership for a limited purpose.
Liability for taxes and debts is shared among the participants in the venture, as if they were a general partnership. Ex: IMAX
Franchises: Franchises are not, strictly speaking, a separate form of organization. They are included here because they represent an important option for entrepreneurs.

Chapter 41: Intellectual Property

Patents: Gives inventors the right to prevent others from making, using, or selling their inventions for a limited time. No one can use the invention without permission.
The Patent and Trademark Office (PTO) issues patents after a long application process known as a prosecution, but courts can invalidate patents that the PTO has granted improperly.
Design Patents: A design patent protects the appearance, not the function, of an item. They are valid for 14 years from the date of issuance.
Plant Patents: Anyone who creates a new type of plant can patent it, provided that the inventor is able to reproduce it asexually—through grafting, for instance, rather than by planting its seeds.
Utility Patents: Utility patents protect how inventions work. Valid for 20 years from the date of filing the application. 94% of patents are utility patents.
To receive a patent, an invention must be:
Novel
Nonobvious: An invention is not patentable if it is obvious to a person with ordinary skill in that particular area.
To determine if an invention is obvious, the PTO and courts look at the difference between it and existing technologies to see if that difference would be unexpected to someone skilled in the field
Utility: To be patented, an invention must be useful. It need not necessarily be commercially valuable, but generally, it must do something.
This requirement is the least restrictive: An invention will only be denied a patent if it has absolutely no practical utility.
Patentable Subject Matter: Not every innovation is patentable. A patent is not available solely for an idea, but only for its tangible application. Ex: Formulas, Laws of Nature
Living Organisms: The case of Diamond v. Chakrabarty involved genetically engineered bacteria that were to treat oil spills.
Those challenging the patent argued that living things could not be patented. The Court held that the bacteria—and other living organisms—could be patented if they are different from anything found in nature and a product of human ingenuity; that is, if they were made or significantly modified by humans.
Patent Priority between 2 inventors: For most of American history, the person who invented and first put the invention into practice had priority over the first filer. But in 2013, the America Invents Act (AIA) changed the law so that the first person to file a patent application has priority.
Prior Sale: An inventor must apply for a patent within one year of selling the product commercially anywhere in the world. This encourages prompt disclosure of inventions.
Patent Infringement: A patent holder has the exclusive right to make, use, or sell the patented invention during the term of the patent. A US patent can be enforced only in US.
The Paris Convention for the Protection of Industrial Property (Paris Convention) requires each member country to accept and recognize all patent and trademark applications filed with it by anyone who lives in any member country.
Copyrights: A copyright gives its creator the exclusive right to reproduce, distribute, and perform his original work for a limited time. They protect the ways ideas are presented but not the idea itself.
Queen Anne approved the 1^st copyright statute in April 1710. It was valid for 14 years and could be extended for 14 more years if the owner is alive.
Today, a copyright is valid until 70 years after the death of the author or, in the case of works owned by a corporation, for 95 years from publication or 120 years from creation, whichever is shorter.
Copyright Infringement: To prove a violation, the plaintiff must present evidence that the work was original and that either:
The infringer actually copied the work or
The infringer had access to the original and the two works are substantially similar.
A court may:
prohibit the infringer from committing further violations.
order destruction of the infringing material; and require the infringer to pay damages, profits earned, and attorney’s fees.
Defense to Copyright Infringement:
First Sale Doctrine: The first sale doctrine permits a person who owns a lawfully made copy of a copyrighted work to sell or otherwise dispose of the copy. If not, people would’ve never been able to resell anything they owned.
Fair Use Doctrine: Permits limited use of copyrighted material without permission of the author for purposes such as criticism, comment, news reporting, scholarship, or research.
Factors determining Fair Use:
Purpose and Character of the Use: When copyrighted material is used for purposes such as criticism, parody, comment, news reporting, scholarship, research, or education, it is more likely to be a fair use.
Nature of Copyrighted Work: Facts receive less protection than fiction. If we were not permitted to use, say, the facts described in a textbook, education would be stifled.
Amount and Proportion of work used: However, when the use, even if minimal, involves the “heart” of the work—or its most important part—it is more likely to be an infringement.
Effect of use upon potential market: Courts generally do not permit a use that will deprive the copyright owner of income or decrease revenues from the original work by, say, competing with it.
Moral Rights: Intellectual property rights protecting the creator’s personal and reputational values, such as the right of attribution and the right of integrity.
To bring copyright law into the Internet age, Congress passed the Digital Millennium Copyright Act (DMCA), which provides that:
It is illegal to delete copyright information, such as the name of the author or the title of the article.
It is illegal to circumvent encryption or scrambling technologies that protect copyrighted works.
It is illegal to distribute tools and technologies used to circumvent encryption devices.
Internet service providers are not liable for posting copyrighted material as long as they are unaware that the material is illegal, and they remove it promptly after receiving a “takedown” notice that it violates copyright law.
The Berne Convention for the Protection of Literary and Artistic Works requires all 179 member countries to provide automatic copyright protection to any works created in other member countries. Doesn’t expire until 50 years after the author has died.
Trademarks: any combination of words and symbols that a business uses to identify its products or services and distinguish them from others. Federal trademarks are governed by the Lanham Act. Valid for 10 years.
4 Types of Marks:
Trademarks are affixed to goods.
Service marks are used to identify services, not products. McDonald’s (restaurant services), UPS (delivery services), and American Airlines (airline services) are service marks.
Certification marks are words or symbols used by a person or organization to attest that products and services produced by others meet certain standards.
Collective marks are used to identify members of an organization.
Registration: A trademark owner may use the symbol ™ at any time, even before registering it, but not until the mark is registered can the symbol ® be placed next to it.
Advantages:
Even if a mark has been used in only one or two states, registration makes it valid nationally.
Registration notifies the public that a mark is in use because anyone who applies for registration first searches the Public Register to ensure that no one else has rights to the mark.
Five years after registration, a mark becomes virtually incontestable because most challenges are barred.
The damages available under the Lanham Act are higher than under common law.
The holder of a registered trademark generally has the right to use it as an internet domain name.
To be valid, a trademark must be distinctive—that is, the mark must clearly distinguish one product from another and identify the product’s source.
Fanciful and Arbitrary Marks: Fanciful marks are made-up words such as Exxon or Saucony. Arbitrary marks use existing words that do not describe the product— “Starbucks” for coffee, for example.
Suggestive Marks indirectly describe the product’s function, qualities, or characteristics. “Microsoft” suggests software for microcomputers, and “Coppertone” suggests what customers will look like after applying the product.
Descriptive marks directly describe the product in some way. These marks cannot, by themselves, be trademarked unless they have acquired secondary meaning, that is, they have been used for so long that they are now associated with the product in the public’s mind. Ex: Windows and Holiday INN
The following categories cannot be trademarked:
Generic trademarks: No one is permitted to trademark a product or service’s ordinary name—shoe (for a footwear company) or restaurant (for an eating establishment), for example.
Personal names: The PTO generally will not grant a trademark in a surname unless it has acquired secondary meaning due to an association with a specific business or product. Ex: Ford, Dell
Geographical Terms: Similarly, geographical names that describe the product’s place of origin, such as Maine lobster or Idaho potatoes, cannot be trademarked because they are generic.
However, geographical terms that are used arbitrarily can be protected, such as Boston Market, California Pizza Kitchen, and Cape Cod Potato Chips.
Deceptive marks: The PTO will not register a mark that is deceptive. It refused to register a trademark with the words “National Collection and Credit Control” and an eagle superimposed on a map of the United States because this trademark gave the false impression that the organization was an official government agency.
Similar to an existing mark: To avoid confusion, the PTO will not grant a trademark that is similar to one already in existence on a similar product. Thus, Airbnb prevented the use of Hairbnb for a dog-sitting service.
Trademark dilution occurs in two important ways: blurring and tarnishment.
Blurring, or the lessening of a mark’s capacity to identify, can occur when a famous mark is identified with unrelated products or services, like Microsoft lipstick or Tesla bicycles.
Tarnishment is an association with unwholesome goods or services.
Infringement remedies include:
destruction of the infringing material,
up to three times actual damages,
any profits the infringer earned on the product, and
attorney’s fees.
A trade secret is a formula, device, process, method, or compilation of information that, when used in business, gives the owner an advantage over competitors who do not know it.
Uniform Trade Secrets Act (UTSA): Anyone who misappropriates a trade secret is liable to the owner for actual damages, unjust enrichment, or a reasonable royalty.
Congress passed the Economic Espionage Act of 1996, which makes it a criminal offense to steal (or attempt to steal) trade secrets for the benefit of someone other than the owner, including for the benefit of any foreign government. Ex: Xiaodong Sheldon Meng was convicted of violating this statute after he was caught stealing computer code used in military weapons. EX: Analyst Sameth Agrawal spent three years in prison for giving his employer’s high-frequency trading algorithms to a New York–based hedge fund.