Business Law Exam 3 Review
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Business Law Exam 3 Review Agency: The Inside Relationship *agency law is concerned with your responsibility for the actions of others -agency tradeoff: if you do everything yourself you can control the result, but because of size and scope of business this is not plausible -once you hire you can be liable for what they do, even if they violate instruction -must hire carefully to limit the risks as much as possibly by understanding the law of agency Creating an Agency Relationship *Agency is the fiduciary relationship that arises when one person manifests assent to another person that the agent shall act on the principal·s behalf and subject to the principal·s control, and the agent manifests assent or otherwise consents to act -principal: the person for whom an agent is acting -agent: person who is acting on behalf of a principal, subject to the principal·s control
*Consent: to establish consent, the principal must ask the agent to do something and the agent must agree -must be clearly defined, hospital example *Control: principals are liable for the acts of their agents because they exercise control over the agents -An agent and principal must not only consent to an agency relationship, but the principal must also have control over the agent *Fiduciary Relationship: special relationship with high standards. The beneficiary places special confidence in the fiduciary, who in turn is obligated to act in good faith and candor, putting his own needs second -the purpose of a fiduciary relationship is for one person to benefit another -Agents have a fiduciary duty to their principals **ALL THREE ELEMENTS MUST EXIST TO CREATE AN AGENCY RELATIONSHIP **Elements NOT required for an Agency relationship: -Written agreement: oral understandings are valid EXCEPT: the equal dignities 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 Ex) under the statute of frauds, a contract for the sale of land is unenforceable unless in writing, so the agency agreement to sell land must also be in writing -A formal agreement: do not need to formally agree on relationship, as long as they act like an agent and principal, the law will treat them as such -Consideration: an agency agreement is valid even if the agent is not paid
Duties of Agents to Principals *Agents owe a fiduciary duty to their principals Duty of Loyalty: an agent has a fiduciary duty to act loyally for the principal·s benefit in all matters connected with the agency relationships -put principal first, strive to accomplish 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 *Competition with the Principal: agents are not allowed to compete with their principal in any matter within the scope of the agency business -once the agency relationship ends, so do the rules against competition *Conflict of Interest between two Principals: unless otherwise agreed, an agent may not act for two principals whose interest conflict *Secretly 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 -applies to off-duty conduct *The duty of loyalty applies unless the principal and agent expressly agree to change it *Duty to 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 -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 or inexperienced agents are held to lower standard, because it·s a favor -these 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 the principal wants to know, also has a duty to provide accurate information Principal·s Remedies when the Agent Breaches a Duty *Principal can recover from the agent any damages the breach has caused *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 wrongdoings *If the agent has violated her duty of loyalty, the principal may rescind the transaction
Duties of Principals to Agents *primarily the principal must reimburse the agent for reasonable expenses and cooperate with the agent in performing agency tasks *Duty to Reimburse the Agent: as a general rule, the principal must indemnify the agent for any expenses she has reasonably incurred These reimbursable expenses fall into three categories: -Payments made by the agent while carrying out his duties: principal must indemnify an agent for any expenses or damages reasonably incurred in carrying out the agency·s responsibilities -principal must also indemnify an agent for an unauthorized purchase if the agent reasonably believed he was authorized and the principal received a benefit -Torts committed by the Agent: 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 -Contracts Entered into by the Agent: the Principal must indemnify the agent for any liability she incurs from third parties 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 -Unless the agency contract provides otherwise, the principal is allowed to compete with the agent -Principal must perform her part of the contract Termination of an Agency Relationship *terminates automatically if the principal or agent can no longer perform his required duties or a change in circumstances renders the agreement pointless *Termination by Agent of Principal: -the two parties have 5 choices available for terminating the relationship -Term Agreement: the principal and agent can agree in advance how long their relationship will last -Achieving a purpose: can terminate when principal·s goals are achieved -Mutual agreement: no matter what is agreed on at the start, they can always change their mind if it is mutual -Agency at will: if they make no agreement in advance about the term of the agreement, either the principal or the agent can terminate at any time -Wrongful termination: either party always has the power to walk out -however if one party·s departure from the agency relationship violates The agreement, then the wrongful party must pay damages
Principal or Agent can No longer Perform required duties *terminates automatically if the principal or agent can no longer perform his required duties *Loss of Qualification: if either party is unable to obtain, or keep the necessary license, the agency agreement ends *Bankruptcy: bankruptcy of the agent or principal terminates an agency relationship only if it affects their ability to perform -rarely affects agent, affects principal greatly *Death or Incapacity of Principal or Agent *Disloyalty of agent: if the agent violates the duty of loyalty, the agency agreement automatically terminates Change in Circumstances *If changes in circumstances are significant enough to undermine the purpose of the agreement, then the relationship ends automatically *Change of law: if the agent·s responsibilities become illegal, the agency agreement terminates *Loss or Destruction of Subject matter Effect of Termination *Once the 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 *Principal·s duty to indemnify the agent: only expenses incurred during the agency *Confidential information: agent is not entitled to use confidential information even after the agency relationship terminates *Power coupled with an interest: no benefit for the principal -only the agent can terminate the relationship, the principal does not have the power or right to terminate *does not terminate with death or incapacity of either principal or agent
Agency: the Outside Relationship
Principal·s Liability for Contracts *The principal is bound by the acts of an agent if -the agent has authority -the principal for reasons of fairness is estopped from denying that the agent had authority -the principal ratifies the acts of the agent
Authority -Express: either by words or conduct the principal grants an agent permission to act -principal asks the agent to do something and the agent does it -in cases of ambiguity about the principal·s intent, the courts look at the principal·s objective manifestation, not his subjective intent *does not matter how the principal·s wishes are communicated -Implied: the agent has authority to perform acts that are reasonably necessary to accomplish an authorized transaction even if the principal does not specify them -unless otherwise agreed, authority to conduct a transaction includes authority to do acts that are reasonably necessary to accomplish it -law assumes that the agent has authority to do anything that is reasonably necessary to accomplish her task -Actual: an agent is authorized to act for a principal (express and implied are the two kinds of actual) -Apparent authority: a principal does something to make an innocent third party believe that an agent is acting with the principal·s authority, even though the agent is not authorized -all about what the principal has done to make the third party believe that the agent actually has authority 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. He is estopped from denying an agency relationship. Ratification -when a person accepts the benefit of an unauthorized transaction or fails to repudiate it -If a person ratifies a transaction, then he is as bound by the act as if he had originally authorized it
Subagents *as a general rule, an agent has no authority to delegate her tasks to another unless the principal authorizes her to do so -but when an agent hires a subagent, the principal is liable for the acts of the subagent -agent is not liable to principal for wrongdoing of subagent unless the hiring was negligent Agent·s Liability for Contracts *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 *Fully disclosed principal: 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 *Undisclosed: the third party can recover from either the agent or the principal -A principal is undisclosed if the third party did not know of his existence **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, the principal is not liable to the third party and the agent is Principal·s Liability for Torts -an employer is liable for a tort committed by its employee acting within the scope of employment or acting with apparent authority *respondeat superior: the principle that an employer is liable for a tort committed by an employee acting with the scope of employment or acting with apparent authority *Two kinds of agents: employees and independent contractors -a principal may be liable for the torts of an employee but generally is not liable for the torts of an independent contractor -the more control the principal has over an agent, the more likely that they agent will be considered an employee *Negligent hiring -Principals prefer agents to be considered independent contractors not employees because principals are not made liable for the torts of an independent contractor -EXCEPT: the principal is liable for the torts of an independent contractor if the principal has been negligent in hiring or supervising her
Scope of Employment -Principals are only liable for torts that an employee commits with the scope of employment -An employee is acting within the scope of employment if the act is: -one that the employees are generally responsible for -takes place during the hours that the employee is generally employed -part of the principal·s business -similar to one the principal authorized -one for which the principal supplied the tools -not seriously criminal -Authorization: in authorization cases, the agent is clearly working for the principal but commits an act that the principal has not authorized -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 -Abandonment: the principal is liable for the actions of the employee that occur while the employee is at work, but not for the actions that occur after the employee has abandoned the principal·s business Negligent and Intentional Torts -the principal is liable if the employee commits a negligent tort that causes physical harm to a person or property -principal not liable for intentional torts of the employee unless the employee intended to serve some purpose of the employer Physical or nonphysical harm -in the case of physical torts, a principal is liable for negligent conduct of an employee that occurs within the scope of employment -nonphysical torts are treated more like a contract claim and the principal is liable if the employee acted with apparent authority Agent·s Liability for Torts -agents are always liable for their own torts
Employment Law *an employee at will can be fired for a good reason, a bad reason or no reason at all Employment Security National Labor Relations Act: -created the National Labor Relations Board to enforce labor laws -prohibits employers from penalizing workers who engage in union activity -requires employers to ´bargain in good faithµ with unions Family and Medical Leave Act: -In 1993 Congress passed FMLA which guarantees both men and women up to 12 weeks of unpaid leave each year for childbirth, adoption or medical emergencies for themselves or a family member -employee must be able to leave and come back with same pay and benefits -applies only to companies with at least 50 workers and to employees who have been with the company full time for at least a year COBRA- Consolidated Omnibus Budget Reconciliation Act -former employees must be allowed to continue their health insurance for 18 months after leaving their job -the catch is that employees must pay for it themselves up to 102% of the cost -applies to any company with 20 or more workers Common Law Protections: -major exception to employment at will doctrine -Wrongful discharge: an employer may not fire a worker for a reason that violates basic social rights, duties or responsibilities -employees may not be discharged for refusing to break the law -an employer may not discharge a worker for exercising a legal right if that legal right supports public policy -an employee cannot be fired for serving on a jury Contract Law: *sometimes courts have also been willing to imply contract terms in the absence of an express agreement *Truth in hiring: oral promises made during the hiring process can be enforceable even if not approved by the company·s top executives *An employee handbook creates a contract *Covenant of good faith and fair dealing: prohibits one party to a contract from interfering with the other·s right to benefit under the contract -all parties are expected to behave in a fair, decent and reasonable manner -in some cases, courts will imply a covenant of good faith and fair dealing in an at-1ill employment relationship
Tort Law Defamation: employers may be liable for defamation when they give false and unfavorable references about a former employee -qualified privilege: employers are only liable for false statements that they know to be or that are motivated by ill will -generally, courts have held that employers do not have a legal obligation to disclose information about former employees -in some recent cases however courts have held that, when a former worker is potentially dangerous, employers do have an obligation to disclose this information IIED: employers who condone cruel treatment of their workers face liability under the tort of IIED Whistleblowing: employees that disclose illegal behavior on the part of their employer -Protected in the following situations: -False Claims Act: permits anyone to bring suit against anyone who defrauds the government, also prohibits employers from firing workers who file suit under the statute -a successful whistleblower receives between 15 and 30 percent of any damages awarded to government -Constitutional Protection for Government Employees: government can·t retaliate against public employees who blow the whistle, as long as the employee is speaking out on a matter of public concern -Statutory Protection for Federal Employees: Congress passed the Civil Service Reform Act and the Whistleblower Protection act which both prevent retaliation against federal employees for reporting wrong doing, also permit the award of back pay and attorney·s fees to the whistleblower -Employees of Publicly Traded Companies: SOX protects employees of publicly traded companies who provide evidence of fraud to investigators, a successful plaintiff is entitled to reinstatement, back pay and attorney·s fees -State Statutes: all 50 states have protection but varies from state to state -Common law: most courts will prohibit the discharge of employees who report illegal activity that relates their own jobs
Workplace Safety -Occupational Safety Health Act -employers must comply with specific standards -employers are under a general obligation to keep their workplace ´free from recognized hazards that are causing or are likely to cause death or serious physical harmµ -must have record of workplace injuries and accidents -OSHA may inspect workplaces to ensure that they are safe and may assess fines for violations and order employers to correct unsafe conditions -Employee Privacy: -entitled to a reasonable expectation of privacy -means that an employer cannot search employee·s home -Off-Duty conduct: in the absence of laws that protect the right of employees to engage in lawful activity when off-duty, the employer does have the right to fire an employee for off-duty conduct -Alcohol and Drug Testing: government employees can be tested for d & a use only if the show signs of use or if they are in a job where this type of use endangers public -Lie detector: employers may not require or even suggest unless it is part of an ´ongoing investigationµ into crime that have occurred Electronic Monitoring of the Workplace: ECPA permits employers to monitors phone and email comm. If -the employee consents -the monitoring occurs in the ordinary course of business -employer provides the email system Financial Protection Fair Labor Standards Act: regulates wages and limits child labor -wage provisions do not apply to managerial, admin, or professional staff Minimum wage: exists Overtime pay: FLSA does not limit the number of hours a week that an employee can work but it does specify that workers must be paid time and a half for any hours over 40 Child labor: prohibits oppressive child labor -children under 14 may only work in agriculture and entertainment -14-15 are permitted to limited hours after school in non hazardous jobs -16-17 is unlimited hours and non hazardous jobs Worker·s Comp -ensures that employees receive payment for injuries incurred at work -worker·s comp statutes provide a fixed, certain recovery to the injured employee no matter who was at fault for the accident, in return employees cannot sue employer for negligence
Social Security -pays benefits to workers who are retired, disabled or temporarily unemployed and to the spouses and children of disabled or deceased workers -also provides medical insurance to the retired and disabled -FUTA: provides support to unemployed
Pension Benefits Employee Retirement Income Security Act (ERISA)- protect workers covered by private pension plans -prohibits risky investments by pension plans -in addition the statute sets rules on the vesting of benefits Equal Pay Act -an employee may not be paid at a lesser rate than employees of the opposite sex for equal work Title VII -it is illegal for employers to discriminate on the basis of race, color, religion, sex or national origin -more specifically title VII prohibits: discrimination in the workplace, sexual harassment and discrimination because of pregnancy, also permits employers to develop affirmative action plans Proof of Discrimination *Plaintiffs in Title VII cases can prove discrimination two different ways: disparate treatment and disparate impact Disparate Treatment: must show treated differently bc of sex, race, color, religion or origin Step 1: presents evidence³called prima facie case. The plaintiff is not required to prove discrimination, need only create a presumption that discrimination occurred Step 2: defendant must present evidence that decision was based on legitimate nondiscriminatory reasons Step 3: plaintiff must now prove the employer discriminated
Disparate Impact: applies if employer has a rule that, on its face is not discriminatory but in practice excludes too many people in protected group 1. Prima facie: plaintiff must show impact- that the practice affected group 2. Defendant must offer some evidence that employment was of job necessity 3. Plaintiff must prove either that the employer·s reason is a pretext or less discriminatory things would get same result
*Employers must make reasonable accommodation for a worker·s religious beliefs unless the request would cause undue hardship for business Defenses to Charges of Discrimination -Merit: if defendant can prove that the hired is more qualified -Seniority: a legitimate seniority system is legal even if it perpetuates past discrimination -Bona Fide Occupational Qualification: employer is permitted to establish discriminatory job reqs if they are essential to the position in question Sexual Harassment -Quid pro quo: one thing in return for another -Hostile work environment: employee has a valid claim of sexual harassment if sexy talk and innuendo are so pervasive that they interfere with his or her ability to work -employees that commit sexual harassment are liable for own deeds -company is liable if victimized employee suffered ´tangible employment actionµ -if have not suffered that, company is not liable if it can prove that it used reasonable care to stop behavior, employee failed to take advantage of complaint procedure provided by company Procedure and Remedies Before a plaintiff in a title VII case brings suit, must file a complaint with EEOC -EEOC then has right to sue on behalf of plaintiff Pregnancy -employer may not fire, refuse to hire or fail to promote because pregnant Age ADEA prohibits discrimination against employees or job applicants who are at least 40 years old Disability -an employer may not disqualify an employee or job applicant because of disability as long as she can with reasonable accommodation perform the essential functions of the job -an accommodation is not reasonable if it would create an undue hardship for employer -employer may not ask about disabilities before making a job offer -after a job offer has been made, an employer may require a medical rest, but it must be related to the essential functions of the job -an employer may not discriminate against someone because of relationship to a disabled person
Starting a Business Sole Proprietorship -unincorporated business owned by one person
*Consent: to establish consent, the principal must ask the agent to do something and the agent must agree -must be clearly defined, hospital example *Control: principals are liable for the acts of their agents because they exercise control over the agents -An agent and principal must not only consent to an agency relationship, but the principal must also have control over the agent *Fiduciary Relationship: special relationship with high standards. The beneficiary places special confidence in the fiduciary, who in turn is obligated to act in good faith and candor, putting his own needs second -the purpose of a fiduciary relationship is for one person to benefit another -Agents have a fiduciary duty to their principals **ALL THREE ELEMENTS MUST EXIST TO CREATE AN AGENCY RELATIONSHIP **Elements NOT required for an Agency relationship: -Written agreement: oral understandings are valid EXCEPT: the equal dignities 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 Ex) under the statute of frauds, a contract for the sale of land is unenforceable unless in writing, so the agency agreement to sell land must also be in writing -A formal agreement: do not need to formally agree on relationship, as long as they act like an agent and principal, the law will treat them as such -Consideration: an agency agreement is valid even if the agent is not paid
Duties of Agents to Principals *Agents owe a fiduciary duty to their principals Duty of Loyalty: an agent has a fiduciary duty to act loyally for the principal·s benefit in all matters connected with the agency relationships -put principal first, strive to accomplish 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 *Competition with the Principal: agents are not allowed to compete with their principal in any matter within the scope of the agency business -once the agency relationship ends, so do the rules against competition *Conflict of Interest between two Principals: unless otherwise agreed, an agent may not act for two principals whose interest conflict *Secretly 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 -applies to off-duty conduct *The duty of loyalty applies unless the principal and agent expressly agree to change it *Duty to 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 -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 or inexperienced agents are held to lower standard, because it·s a favor -these 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 the principal wants to know, also has a duty to provide accurate information Principal·s Remedies when the Agent Breaches a Duty *Principal can recover from the agent any damages the breach has caused *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 wrongdoings *If the agent has violated her duty of loyalty, the principal may rescind the transaction
Duties of Principals to Agents *primarily the principal must reimburse the agent for reasonable expenses and cooperate with the agent in performing agency tasks *Duty to Reimburse the Agent: as a general rule, the principal must indemnify the agent for any expenses she has reasonably incurred These reimbursable expenses fall into three categories: -Payments made by the agent while carrying out his duties: principal must indemnify an agent for any expenses or damages reasonably incurred in carrying out the agency·s responsibilities -principal must also indemnify an agent for an unauthorized purchase if the agent reasonably believed he was authorized and the principal received a benefit -Torts committed by the Agent: 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 -Contracts Entered into by the Agent: the Principal must indemnify the agent for any liability she incurs from third parties 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 -Unless the agency contract provides otherwise, the principal is allowed to compete with the agent -Principal must perform her part of the contract Termination of an Agency Relationship *terminates automatically if the principal or agent can no longer perform his required duties or a change in circumstances renders the agreement pointless *Termination by Agent of Principal: -the two parties have 5 choices available for terminating the relationship -Term Agreement: the principal and agent can agree in advance how long their relationship will last -Achieving a purpose: can terminate when principal·s goals are achieved -Mutual agreement: no matter what is agreed on at the start, they can always change their mind if it is mutual -Agency at will: if they make no agreement in advance about the term of the agreement, either the principal or the agent can terminate at any time -Wrongful termination: either party always has the power to walk out -however if one party·s departure from the agency relationship violates The agreement, then the wrongful party must pay damages
Principal or Agent can No longer Perform required duties *terminates automatically if the principal or agent can no longer perform his required duties *Loss of Qualification: if either party is unable to obtain, or keep the necessary license, the agency agreement ends *Bankruptcy: bankruptcy of the agent or principal terminates an agency relationship only if it affects their ability to perform -rarely affects agent, affects principal greatly *Death or Incapacity of Principal or Agent *Disloyalty of agent: if the agent violates the duty of loyalty, the agency agreement automatically terminates Change in Circumstances *If changes in circumstances are significant enough to undermine the purpose of the agreement, then the relationship ends automatically *Change of law: if the agent·s responsibilities become illegal, the agency agreement terminates *Loss or Destruction of Subject matter Effect of Termination *Once the 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 *Principal·s duty to indemnify the agent: only expenses incurred during the agency *Confidential information: agent is not entitled to use confidential information even after the agency relationship terminates *Power coupled with an interest: no benefit for the principal -only the agent can terminate the relationship, the principal does not have the power or right to terminate *does not terminate with death or incapacity of either principal or agent
Agency: the Outside Relationship
Principal·s Liability for Contracts *The principal is bound by the acts of an agent if -the agent has authority -the principal for reasons of fairness is estopped from denying that the agent had authority -the principal ratifies the acts of the agent
Authority -Express: either by words or conduct the principal grants an agent permission to act -principal asks the agent to do something and the agent does it -in cases of ambiguity about the principal·s intent, the courts look at the principal·s objective manifestation, not his subjective intent *does not matter how the principal·s wishes are communicated -Implied: the agent has authority to perform acts that are reasonably necessary to accomplish an authorized transaction even if the principal does not specify them -unless otherwise agreed, authority to conduct a transaction includes authority to do acts that are reasonably necessary to accomplish it -law assumes that the agent has authority to do anything that is reasonably necessary to accomplish her task -Actual: an agent is authorized to act for a principal (express and implied are the two kinds of actual) -Apparent authority: a principal does something to make an innocent third party believe that an agent is acting with the principal·s authority, even though the agent is not authorized -all about what the principal has done to make the third party believe that the agent actually has authority 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. He is estopped from denying an agency relationship. Ratification -when a person accepts the benefit of an unauthorized transaction or fails to repudiate it -If a person ratifies a transaction, then he is as bound by the act as if he had originally authorized it
Subagents *as a general rule, an agent has no authority to delegate her tasks to another unless the principal authorizes her to do so -but when an agent hires a subagent, the principal is liable for the acts of the subagent -agent is not liable to principal for wrongdoing of subagent unless the hiring was negligent Agent·s Liability for Contracts *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 *Fully disclosed principal: 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 *Undisclosed: the third party can recover from either the agent or the principal -A principal is undisclosed if the third party did not know of his existence **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, the principal is not liable to the third party and the agent is Principal·s Liability for Torts -an employer is liable for a tort committed by its employee acting within the scope of employment or acting with apparent authority *respondeat superior: the principle that an employer is liable for a tort committed by an employee acting with the scope of employment or acting with apparent authority *Two kinds of agents: employees and independent contractors -a principal may be liable for the torts of an employee but generally is not liable for the torts of an independent contractor -the more control the principal has over an agent, the more likely that they agent will be considered an employee *Negligent hiring -Principals prefer agents to be considered independent contractors not employees because principals are not made liable for the torts of an independent contractor -EXCEPT: the principal is liable for the torts of an independent contractor if the principal has been negligent in hiring or supervising her
Scope of Employment -Principals are only liable for torts that an employee commits with the scope of employment -An employee is acting within the scope of employment if the act is: -one that the employees are generally responsible for -takes place during the hours that the employee is generally employed -part of the principal·s business -similar to one the principal authorized -one for which the principal supplied the tools -not seriously criminal -Authorization: in authorization cases, the agent is clearly working for the principal but commits an act that the principal has not authorized -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 -Abandonment: the principal is liable for the actions of the employee that occur while the employee is at work, but not for the actions that occur after the employee has abandoned the principal·s business Negligent and Intentional Torts -the principal is liable if the employee commits a negligent tort that causes physical harm to a person or property -principal not liable for intentional torts of the employee unless the employee intended to serve some purpose of the employer Physical or nonphysical harm -in the case of physical torts, a principal is liable for negligent conduct of an employee that occurs within the scope of employment -nonphysical torts are treated more like a contract claim and the principal is liable if the employee acted with apparent authority Agent·s Liability for Torts -agents are always liable for their own torts
Employment Law *an employee at will can be fired for a good reason, a bad reason or no reason at all Employment Security National Labor Relations Act: -created the National Labor Relations Board to enforce labor laws -prohibits employers from penalizing workers who engage in union activity -requires employers to ´bargain in good faithµ with unions Family and Medical Leave Act: -In 1993 Congress passed FMLA which guarantees both men and women up to 12 weeks of unpaid leave each year for childbirth, adoption or medical emergencies for themselves or a family member -employee must be able to leave and come back with same pay and benefits -applies only to companies with at least 50 workers and to employees who have been with the company full time for at least a year COBRA- Consolidated Omnibus Budget Reconciliation Act -former employees must be allowed to continue their health insurance for 18 months after leaving their job -the catch is that employees must pay for it themselves up to 102% of the cost -applies to any company with 20 or more workers Common Law Protections: -major exception to employment at will doctrine -Wrongful discharge: an employer may not fire a worker for a reason that violates basic social rights, duties or responsibilities -employees may not be discharged for refusing to break the law -an employer may not discharge a worker for exercising a legal right if that legal right supports public policy -an employee cannot be fired for serving on a jury Contract Law: *sometimes courts have also been willing to imply contract terms in the absence of an express agreement *Truth in hiring: oral promises made during the hiring process can be enforceable even if not approved by the company·s top executives *An employee handbook creates a contract *Covenant of good faith and fair dealing: prohibits one party to a contract from interfering with the other·s right to benefit under the contract -all parties are expected to behave in a fair, decent and reasonable manner -in some cases, courts will imply a covenant of good faith and fair dealing in an at-1ill employment relationship
Tort Law Defamation: employers may be liable for defamation when they give false and unfavorable references about a former employee -qualified privilege: employers are only liable for false statements that they know to be or that are motivated by ill will -generally, courts have held that employers do not have a legal obligation to disclose information about former employees -in some recent cases however courts have held that, when a former worker is potentially dangerous, employers do have an obligation to disclose this information IIED: employers who condone cruel treatment of their workers face liability under the tort of IIED Whistleblowing: employees that disclose illegal behavior on the part of their employer -Protected in the following situations: -False Claims Act: permits anyone to bring suit against anyone who defrauds the government, also prohibits employers from firing workers who file suit under the statute -a successful whistleblower receives between 15 and 30 percent of any damages awarded to government -Constitutional Protection for Government Employees: government can·t retaliate against public employees who blow the whistle, as long as the employee is speaking out on a matter of public concern -Statutory Protection for Federal Employees: Congress passed the Civil Service Reform Act and the Whistleblower Protection act which both prevent retaliation against federal employees for reporting wrong doing, also permit the award of back pay and attorney·s fees to the whistleblower -Employees of Publicly Traded Companies: SOX protects employees of publicly traded companies who provide evidence of fraud to investigators, a successful plaintiff is entitled to reinstatement, back pay and attorney·s fees -State Statutes: all 50 states have protection but varies from state to state -Common law: most courts will prohibit the discharge of employees who report illegal activity that relates their own jobs
Workplace Safety -Occupational Safety Health Act -employers must comply with specific standards -employers are under a general obligation to keep their workplace ´free from recognized hazards that are causing or are likely to cause death or serious physical harmµ -must have record of workplace injuries and accidents -OSHA may inspect workplaces to ensure that they are safe and may assess fines for violations and order employers to correct unsafe conditions -Employee Privacy: -entitled to a reasonable expectation of privacy -means that an employer cannot search employee·s home -Off-Duty conduct: in the absence of laws that protect the right of employees to engage in lawful activity when off-duty, the employer does have the right to fire an employee for off-duty conduct -Alcohol and Drug Testing: government employees can be tested for d & a use only if the show signs of use or if they are in a job where this type of use endangers public -Lie detector: employers may not require or even suggest unless it is part of an ´ongoing investigationµ into crime that have occurred Electronic Monitoring of the Workplace: ECPA permits employers to monitors phone and email comm. If -the employee consents -the monitoring occurs in the ordinary course of business -employer provides the email system Financial Protection Fair Labor Standards Act: regulates wages and limits child labor -wage provisions do not apply to managerial, admin, or professional staff Minimum wage: exists Overtime pay: FLSA does not limit the number of hours a week that an employee can work but it does specify that workers must be paid time and a half for any hours over 40 Child labor: prohibits oppressive child labor -children under 14 may only work in agriculture and entertainment -14-15 are permitted to limited hours after school in non hazardous jobs -16-17 is unlimited hours and non hazardous jobs Worker·s Comp -ensures that employees receive payment for injuries incurred at work -worker·s comp statutes provide a fixed, certain recovery to the injured employee no matter who was at fault for the accident, in return employees cannot sue employer for negligence
Social Security -pays benefits to workers who are retired, disabled or temporarily unemployed and to the spouses and children of disabled or deceased workers -also provides medical insurance to the retired and disabled -FUTA: provides support to unemployed
Pension Benefits Employee Retirement Income Security Act (ERISA)- protect workers covered by private pension plans -prohibits risky investments by pension plans -in addition the statute sets rules on the vesting of benefits Equal Pay Act -an employee may not be paid at a lesser rate than employees of the opposite sex for equal work Title VII -it is illegal for employers to discriminate on the basis of race, color, religion, sex or national origin -more specifically title VII prohibits: discrimination in the workplace, sexual harassment and discrimination because of pregnancy, also permits employers to develop affirmative action plans Proof of Discrimination *Plaintiffs in Title VII cases can prove discrimination two different ways: disparate treatment and disparate impact Disparate Treatment: must show treated differently bc of sex, race, color, religion or origin Step 1: presents evidence³called prima facie case. The plaintiff is not required to prove discrimination, need only create a presumption that discrimination occurred Step 2: defendant must present evidence that decision was based on legitimate nondiscriminatory reasons Step 3: plaintiff must now prove the employer discriminated
Disparate Impact: applies if employer has a rule that, on its face is not discriminatory but in practice excludes too many people in protected group 1. Prima facie: plaintiff must show impact- that the practice affected group 2. Defendant must offer some evidence that employment was of job necessity 3. Plaintiff must prove either that the employer·s reason is a pretext or less discriminatory things would get same result
*Employers must make reasonable accommodation for a worker·s religious beliefs unless the request would cause undue hardship for business Defenses to Charges of Discrimination -Merit: if defendant can prove that the hired is more qualified -Seniority: a legitimate seniority system is legal even if it perpetuates past discrimination -Bona Fide Occupational Qualification: employer is permitted to establish discriminatory job reqs if they are essential to the position in question Sexual Harassment -Quid pro quo: one thing in return for another -Hostile work environment: employee has a valid claim of sexual harassment if sexy talk and innuendo are so pervasive that they interfere with his or her ability to work -employees that commit sexual harassment are liable for own deeds -company is liable if victimized employee suffered ´tangible employment actionµ -if have not suffered that, company is not liable if it can prove that it used reasonable care to stop behavior, employee failed to take advantage of complaint procedure provided by company Procedure and Remedies Before a plaintiff in a title VII case brings suit, must file a complaint with EEOC -EEOC then has right to sue on behalf of plaintiff Pregnancy -employer may not fire, refuse to hire or fail to promote because pregnant Age ADEA prohibits discrimination against employees or job applicants who are at least 40 years old Disability -an employer may not disqualify an employee or job applicant because of disability as long as she can with reasonable accommodation perform the essential functions of the job -an accommodation is not reasonable if it would create an undue hardship for employer -employer may not ask about disabilities before making a job offer -after a job offer has been made, an employer may require a medical rest, but it must be related to the essential functions of the job -an employer may not discriminate against someone because of relationship to a disabled person
Starting a Business Sole Proprietorship -unincorporated business owned by one person
