BLAW 5332- Test #1 Key Terms
Chapter 32,33
Agency, principal-agent, vicarious liability, respondeat superior doctrine relating to tort liability
for principal, vicarious liability contract liability, power of attorney (POA), limited and general,
POA, attorney in fact, death of principal or agent terminates POA; Master -Servant doctrine,
employee vs. independent contractor. In addition, “control test.” What are consequences arise
out of being an employee vs. independent contractor
Agency: the fiduciary relation that results from the manifestation of consent by one person to
another that the other shall act in his behalf and subject to his control, and consent by the other
to do so; agent agrees to represent or act for the other, called the principal. The principal has the
right to control the agent’s conduct in matters entrusted to the agent
principal-agent, Agency is created when a person or company – the agent – agrees to act for, or
in place of, another person or company – the principal- who provides the agent with authority to
do so. The agent represents the principal. An agent may negotiate and legally bind a principal to
contracts with third parties under the scope of authority granted by the principal. Principals
purpose for developing agency relationships is to expand business opportunities and use the
expertise of agents; the agent will act on behalf and instead of the principal in negotiating and
transacting business with third parties; normally all employees who deal with third parties are
deemed to be agents of employers
vicarious liability, under the rule of vicarious liability, a principal or employer can be liable for the
authorized or unauthorized intentional or negligent torts of agents and employees who were
acting within the scope of employment. – the act was of the same general nature as those
authorized by the principal, the agent was authorized to be where he was at the time the act
occurred, the agent was serving the principal’s interests at the time of the act; indirect liability
respondeat superior doctrine relating to tort liability for principal: The rule of law imposing
vicarious liability upon an innocent principal. This doctrine has been justified on the grounds that
the principal is in a better position to protect the public from such torts by controlling the actions
of its agents and to compensate those injured. Also means that employers =may be liable for torts
of employees that can be attributed to negligent hiring or supervision. by agent
employee in the
strict liability
scope of employment
contract liability, the primary purpose of agency relationships is to help principals expand
business activities. Agents enter in to contracts on behalf of the principal. The rights and liabilities
of the principal and agent may be determined by whether the principal is disclosed or undisclosed.
Disclosed principal is liable to a third party for a contract made by an agent who had actual
authority to act on behalf of the principal. The principal is also liable if a third party enters into a
contract with an agent with apparent authority. However, an agent who violate the duty of
obedience to the principal is liable to the principal for any losses.
Undisclosed principal is one whose third party is unaware of both the identity of the principal and
the agency relationship. The agent is liable to the third party for the principal’s nonperformance
of the contract. If agent had authority, then principal is liable
-
power of attorney (POA), one legal document that established an agency is the power of
attorney, can be general or it can provide the agent with limited authority to act for the principal
for one deal. POA described the document itself and does not mean that the “attorney-in-fact” is
actually an attorney; confers express authority
If agent
Agent
is
may be
within
liable
Scope :
if
principal
partially disclosed
Disclosed
Undisclosed
,
is
or
course
general POA: grants extensive authority to the agent, it should be used with great caution and
usually only in exceptional circumstances
Limited POA Does
this
mean
special POA
attorney in fact: Someone specifically named by another through a written POA to act for that
person in the conduct of the appointer’s business; an agent who holds a power of attorney is called
an “attorney-in-fact” for the principal. The holder does not need to be an attorney
death of principal terminates POA.;
Master -Servant doctrine, Means the same as employer-employee relationship. The Servant
(employee) is hired by a master (employer). Applies when employee is under direct control of an
employer. When employee does not have authority to represent the employer in business
dealings, no agency exists; a master servant relationship exists. Employers liable for torts
committed by employees.
employee vs. independent contractor. and “control test.” An independent contractor is not an
employee, and the employer does not control the details of the independent contractor’s
performance; the contractor is usually not an agent; page 607 control test
1.How much control does the employer exercise over the details of the work
2. is the worker engaged in an occupation or business distinct from that of work of the employer
3. is the work usually done under the employer’s direction or by a specialist without supervision
4. Does the employer supply the tools at the place of work?
5. For how long is the person employed?
6. what is the method of payment—by time period or at the completion of the job?
7. what degree of skill is required of the worker
What are consequences of being an employee? Minimum wage, union, protection of workplace
safety, etc.
In addition, “control test.”: 1. The power to select and hire the employee, 2. The payment of
wages, 3. The power of discharge, 4. The power to control the employee’s conduct, 5. Whether
the work is part of the regular business of the employer Most important criteria
by
degree of control
used
the IRS
.
What are consequences arise out of being an employee vs. independent contractor
Independent Contractor = no WARN Act; pay SS 15.3%; no workers comp
Chapter 34/35
-Employment–at-will doctrine, wrongful termination, “good faith” exception in California,
Texas exceptions (jury duty, refusal to do an illegal act, Sabine case re refusing to obey order to
break law, military service obligation, post-employment covenant not-to compete must be
“reasonable” in Texas and none in CA, OSHA, worker’s compensation statute, “course and scope
of authority” as basis of employer liability, Fair Labor standards Act, minimum wage (how employer $2.13
determined), overtime (how to compute payment for hours over 40 in a week), Tip credit, → to only pay
An hour
Social Security benefits, 6.2% for SS plus 1,45% for Medicare b= 7.65% contribution by employer
in behalf of employee, employee contribution, retirement defined benefit plans, defined
contributions plans (e.g. 401(k) plans, contribution by employee, matching contribution by
employer, ERISA, vesting, labor law, National Labor Relations Act, NLRB, labor organizations,
authorization cards, employer right to refuse recognition based on cards, representation
election by secret ballot, bargaining unit, collective bargaining in good faith, mandatory subjects
of collective bargaining, right to work state, “good faith” as restriction on employer right to
discipline employees per most labor contracts, , grievance/arbitration clause, seniority (start
date (how to apply seniority), strikes, employer right to hire replacements, “scab labor”, lockout,
unfair labor practice charges,
required
Chapter 16- 1964 Civil Rights Act of 1964, Title 7, EEOC, race, (affirmative action or reverse
discrimination), color, religion (reasonable accommodation, undue hardship) sex (pregnancy
discrimination, quid pro quo discrimination, hostile environment, sexual harassment, same sex
harassment, Harris case), 180-day deadline to file EEOC charge, “No cause” or “Cause” finding,
Right-To-Sue letter, 90 days to file lawsuit in federal court, disparate treatment, legitimate
,nondiscriminatory reason by employer , disparate impact case (business necessity as employer
defense), “training defense” under Farragher. BFOQ! ADEA, ADA, Equal Pay Act.
FMLA → worked for employers
fo
-
more
than
one
year
Employment–at-will doctrine: Refers to presumption that employment is for an indefinite period
of time and may be terminated either by employer or employee.
wrongful termination: When a firm dismisses an employee in violation of a public policy exception
to the right of at-will discharge, employee can sue.
“good faith” exception in California: Exception to the exclusionary rule barring the use at trial of
evidence obtained due to an unlawful search and seizure. If officers had reasonable, good faith
belief that they were acting according to legal authority, such as
relying on a search warrant that
I
was later found to be legally defective, the illegally seized evidence is admissible.
refusal to commit act and public policy violation are exceptions to doctrine in Texas: workers can
refuse to commit act if its illegal.
Sabine case re refusing to obey order to break law,
Military service obligation → uSERRA
post-employment covenant not-to compete must be “reasonable” in Texas and not legal in CA, ok
“no raiding post-employment clause, designed to protect an employer’s business interest in
keeping its workforce intact even after the departure of key employees, within 6 months of the
employees departure date.
interstate commerce clause as basis for government involvement, ok
federal
&
OSHA, occupational safety and health administration, assures safe working conditions and
enforces standards. Protects whistleblowers.
worker’s compensation statute: Requires employers to pay insurance premiums for injury and
death benefits for employees. Provided a more certain recovery with benefits paid regardless of
the cause of a work-related injury, i.e. no fault insurance. → administrative procedure for compensating
“injured in course and scope of job”: For injury to be compensable, it must have occurred while in
the course and scope of employment.
Fair Labor standards Act: Establishes minimum wage, overtime pay, recordkeeping, and youth
employment standards affecting employees.
minimum wage (how determined): Department of labor determines it
765%
pay
overtime (how to compute payment for hours over 40 in a week), time and a half
both
$tip credit is $2.13.
and Medicare →
SS
6.2 1.45
regular minimum wage is $7.25,
Social Security benefits, retirement, disability, dependents, and survivor benefits. 1contribution by employer in behalf of employee, retirement
employee contribution: retirement
15.3%
retirement defined benefit plans: Employers guarantee a specific retirement benefit amount for
each participant of a defined benefit plan, which can be based on the employee's salary, years of
service or a number of other factors. Employees have little control over the funds until they are
received in retirement.
defined contributions plans (e.g. 401(k) plans: Defined contribution plans are funded primarily
by the employee, called the participant, with the employer matching contributions to a certain
amount.
matching contribution by employer,
ERISA: Employee Retirement Income Security Act; created the Pension Benefit Guaranty
Corporation; key provision is vesting; rights to employer contributions vest after 5 years of
employment generally all employee contributions to pension plans rest immediately
vesting, Vesting requirements guarantee that plan participants receive some retirement benefits
after a certain length of employment. Mandatory vesting – when the employee becomes the owner
of the funds in a retirement program
labor law: mediates the relationship between workers, employers, unions, and the government.
yellow dog contracts: agreement between an employer and an employee in which the employee
agrees, as a condition of employment, not to be a member of a labor union.
National Labor Relations Act: Protects the rights of employees and employers, to encourage
collective bargaining, and to curtail certain private sector labor and management practices which
can harm the general welfare of workers. Guarantees the rights of unions.
labor organizations, labor unions
authorization cards, Union organizer’s first step toward establishing a union as your exclusive
bargaining unit. If enough cards are signed, then it’s possible that everyone in that bargaining unit
would be unionized.
employer right to refuse recognition based on cards, ok
representation election by secret ballot, If a union organizer collects authorization cards signed
by 30% or more of the employees asking for an election to be held to determine whether the union
should represent them, the organizer turns the cards over to the NLRB and requests the
representation election, which determines whether a majority of employees in the bargaining unit
wants the union as their agent.
bargaining unit, May be all the workers at a company, the workers at one plant, or workers in
certain skills at one or more work sites, such as nurses at a hospital. Managers may not be in a
bargaining unit.
for
6.z
collective bargaining in good faith, good faith is a legal requirement, requires employers and
unions involved in collective bargaining to use their best endeavors to agree, meet and consider
and respond to proposals made by each other, respect the role of the other’s representative, and
not do anything to undermine the bargaining process or the authority of the other representative.
mandatory subjects of collective bargaining, wages, benefits such as health care and pension,
grievance and arbitration procedures, contract length, seniority, strikes, lock outs, management
rights clauses, etc.
right to work state, right to work for a living without being compelled to belong to a union. Must
have the right, but must not be compelled to join a labor union.
“good faith” as restriction on employer right to discipline employees per most labor contracts
protection for workers, employer must have just cause for termination of a worker.
grievance/arbitration clause, a procedure agreed upon by contract or collective bargaining
agreement for the settlement of grievances relation to violation of collective bargaining
agreement.
limits
to
seniority (start date (how to apply seniority), right under NLRA within
strikes: employer right to hire replacements, strike
“scab labor”, person who works despite an ongoing strike. Usually hired after or during the strike
to keep organization running.
lockout, the exclusion of employees by their employer from their work until certain terms are
agreed to. some lockouts are illegal
unfair labor practice charges, Actions by employers or unions that impair the goals of the NLRA.
Whistleblower: False Claims Act
Chapter 16- 1964 Civil Rights Act of 1964, Title 7, EEOC, race, (affirmative action or reverse
discrimination), color, religion (reasonable accommodation, undue hardship) sex (pregnancy
discrimination, quid pro quo discrimination, hostile environment, sexual harassment, same sex
harassment, Harris case), 180-day deadline to file EEOC charge, “No cause” or “Cause” finding,
Right-To-Sue letter, 90 days to file lawsuit in federal court, disparate treatment, legitimate
,nondiscriminatory reason by employer , disparate impact case (business necessity as employer
Malle and female
defense), “training defense” under Farragher. BFOQ! ADEA, ADA, Equal Pay Act. → pay for
fins at
employees
Wor
establishment
some
doing similar
1964 Civil Rights Act of 1964, Made it so employers couldn’t hire and fire at will, especially based
on race, sex, or any other personal characteristics.
Title 7: most important antidiscrimination employment law. Amendments include the Equal
Employment Opportunity Act of 1972 to give the Equal Employment Opportunity Commission
the power to enforce the Act, by the pregnancy Discrimination Act, and by the Civil Rights Act of
1991. Makes it illegal for an employer of 15 or more workers: to refuse to hire or fire any individual,
or otherwise discriminate against any individual with respects to compensation, terms,
conditions, or privileges of employment. Or to limit, segregate, or classify his employees or
applicants for employment in any way which would deprive or tend to deprive any individual of
employment opportunities or affect his status as an employee because of race, color, religion, sex,
or national origin.
basis of
race
,
color
national
origin
work
EEOC, Equal Employment Opportunity Commission is responsible for enforcing federal laws that
make it illegal to discriminate against a job applicant or an employee because of a person’s race,
color, etc.
race,
(affirmative action or reverse discrimination),
color,
religion (reasonable accommodation, undue hardship)
sex (pregnancy discrimination,
quid pro quo discrimination, A promise for a reward for a sexual favor. 1st form of Sexual
harassment.
hostile environment: Second form of sexual harassment, created at work by others. An abusive
work environment is created by words or acts related to a person’s sex.
sexual harassment, A sexually hostile work environment is a form of sex discrimination. Sexual
harassment defined by EEOC is unwelcome sexual advances, requests for sexual favors, and other
verbal or physical conduct of a sexual nature.
same sex harassment, same thing as sexual harassment
Harris case), Harris sued because boss created hostile work environment of sexual harassment.
180-day deadline to file EEOC charge, need to file charge within 180 days since the discrimination
took place.
“No cause” or “Cause” finding, no cause = no violation; cause = yes violation
Right-To-Sue letter, After cause established, EEOC issues right to sue letter that can be used in
proceeding to court.
90 days to file lawsuit in federal court,
disparate treatment, To recover from illegal discrimination, in a claim of disparate treatment, the
plaintiff must prove that the employer intentionally discriminated.
McDonnel Douglas presumption to meet burden of proof, Plaintiff must provide prima facie case
of discrimination. 1. Belongs to protected class 2. Met job qualifications 3. Was subject to an
adverse employment action 4. The action gave rise to an interference of discrimination. THEN
Employer must present (legitimate, nondiscriminatory reason by employer) , THEN plaintiff
must show employer’s response to be an excuse for discrimination
disparate impact case (business necessity as employer defense), When the employer used a
decision rule that caused discrimination in some aspect of employment based on protected class
status. protected group of people are adversely affected by an employer's practices
“training defense” under Farragher. Anti-harassment training as a legal defense.
BFOQ Bona fide occupational qualification, title 7 states that discrimination is permitted in
instances in which sex, religion, or national origin – but not race- is a reasonably necessary to the
normal operation of that particular business.
ADEA, Age Discrimination in Employment Act - Employers must not force “involuntary
to
20 or more
@motogees
2 retirement” on older workers. Applies
ADA. Americans with Disabilities Act expands the rights of persons with disabilities in
employment and supplements access rights to public accommodations, such as hotels,
restaurants, theaters, public transportation, telecommunications, and retail stores. Applies to
employers with 15 or more employees.
(
✓
Equal
pay
Act
Ellerth case at P. 447, Ellerth was sexually harassed and quit Burlington, although they had antiharassment training in place.
Age Discrimination in Employment Act at P. 442, prohibits discrimination in employment against
persons on the basis of age for persons over age 40. All employers with over 20 employees must
comply.
awful discrimination was the reason for the adverse employment
APE
Affirmative
eeeerthffaraghertr defense
1. employer must
to prevent and
have
taken
promptly
.
.
.
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taken reasonable care
"
owe
of
age
discrimination
plaintiff employee must have had unreasonably failed to take
opportunities provided by the employer to avoid harm
2. the
-
action
advantage of
preventive or
corrective
disadvantages
benefits
-
•
'
taxes
liability
.
flexibility
personal
.
q
f
.
hard to
assets at risk
raise
capital
Chapter 36-Sole proprietor, benefits vs. disadvantages, Franchise, franchisor/franchisee,
Franchise disclosure Document, key clauses (e.g. geography exclusivity, right to audit, quality
assurance, etc.)
Sp
All videos and handouts.
Sole proprietorships, A person doing business for himself or herself is a sole proprietor; the
business is a sole proprietorship. Simplest form of business organization. Owner is the business.
Capital comes from the owners resources.
assumed name certificate or d/b/a, Must be filled to begin business, (doing business as)
liability of sole proprietor, Owner is personally liable for all business debts
under respondeat superior doctrine, Makes an employer liable for the actions of an employee
when actions take place within scope of employment.
tax treatment, pg 326
r ‘corporate veil”, liability shield that inherently attaches to the shareholders of a corporation.
Shareholders are not personally liable for the corporate debts or for torts committed by the
corporation. Can be pierced of limited liability organizations and hold owners personally liable
under some circumstances, and impose liability on shareholders for fraud.
Texas Secretary of State, Administers Texas election Code, maintains public filings
articles of incorporation, Establish the existence of a corporation in the United States and are filed
with the Secretary of State.
charter, written grants for special privileges to corporations, such as having the only bank in a
town.
bylaws, rules that regulate and govern the internal operations of the corporation that
shareholders, directors, and officers of corporation must fallow while conducting corporate
activities.
registered agent, a business or individual designated to receive service of process when a business
entity is a party in a legal action such as lawsuit or summons.
principal place of business, Where the business’s books and records are kept and is often where
the head of the firm – or at least upper management - is located. Corporations are usually required
to report their principal place of business to the Secretary of State.
incorporator, Incorporators hold formal organizational meeting, where they elect a board of
directors, enact the corporations bylaws, and issue the corporation’s stock.
duration of corporation: They last until termination, which can be caused by dissolution which
may be voluntary or involuntary, such as through bankruptcy. Upon dissolution corporation may
not take on any new business.
double taxation: compared with partnerships and proprietorships, the corporate form of
organization presents entrepreneurs with a disadvantage, double taxation of profits – and an
advantage – limited liability. The profits of corporations are taxed at the corporate level unless
there is an S corporation election. Shareholders then also have to pay income taxes on profits
they receive.
S Corporation election, Such corporations may have only one class of stock and may not have
more than 100 shareholders of natural persons who are U.S. citizens or legal residents, not other
corporations or partnerships. Election is taken for tax considerations. Profits and losses must be
allocated to the shareholders who pay income taxes. S corporation does not pay taxes, so it is like
a partnership for tax purposes. For active business only, if more than a quarter of gross receipts
to the corporation are from passive (investment) income, IRS will revert company back to regular
C corporation. Popular for smaller business.
shareholders/directors/ employees and officers), Shareholders own the corporation. Directors
are the governing committee of a corporation chosen by the incorporators at the first corporate
meeting. Serve terms for a time specified in the articles, although shareholders can remove
directors for cause such as misconduct. Meet at least once a year and keep records of meetings.
Sets corporate policy and decides business. Directors immune from liability when problems result
from honest mistakes in judgement under business judgement rule. Directors subject to fiduciary
duty of loyalty, requiring that directors place the interests of the corporation before their own
interests. Board of directors hire managers to run the business.
business judgment rule: presumption that in making a business decision, the directors of a
corporation acted on an informed basis, in good faith, and in the honest belief that the action
taken was in the best interests of the company.
limited liability company, A limited liability company is a business organization that is treated
like a corporation for liability purposes but like a partnership for federal tax purposes. Profits are
taxed only once.
LLC, Limited liability company must include LLC in name.
FEIN, federal employer identification number, assigned by IRS.
members, LLC usually formed by two or more members.
membership interest, ^The members have membership interest in the company, somewhat like
owning stock in a corporation or being a limited partner in a limited partnership. Usually under
30 members.
operating agreement (compare to bylaws of regular corporation), members sign an operating
agreement, similar to bylaws of a corporation.
partnership relationship, Defined as an association of two or more persons to carry on a business
as co-owners for a profit.
general partners, ^The partners, or more accurately, general partners, share control over the
business’s operations and profits. A “person” who is a partner in a partnership may be another
partnership, a corporation, or some other entity.
limited partnership, A business organization made up of two or more persons who have entered
into an agreement to carry on a business venture for a profit. Unlike a general partnership, not all
partners in a limited partnership have the right to participate in the management of the enterprise
and not all are liable for partnership debts.
limited partners, A limited partnership has at least one general partner and one or more limited
partners. The general partners in a limited partnership are treated in the same manner as are
partners in a general partnership. Limited partners are investors who may not participate in
managing the business. Although they have the right to see the partnership books and participate
in the dissolution of the business, they are not liable for the debts or torts of the LP beyond their
capital contributions. They lose their limited liability and become general partners if they take an
active role in managing the business. Limited partners may not take control of the firm, contribute
services to the business, or allow their names to appear in the name of the business.
partners liability in both general and limited partnerships. General partners have responsibility
for managing the business and are personally liable to the partnership’s creditors, while limited
partners are not liable for debts owed by the limited partnership as long they maintain their
investor position.
franchisor/franchisee, A franchise exists whenever a franchisee, in return for payment of a
franchise fee, is granted the right to sell goods or services by a franchisor according to a marketing
plan. Franchisee operates as an independent business, usually as a corporation or LLC, subject to
the standards specified by the franchisor. The franchisee benefits from the expertise and
marketing of the franchisor, and the franchisor benefits because the franchisee usually provides
capital to fund the individual franchise location and works harder as the owner of the franchise.
franchise contract at P. 331 at Ex. 12.4 and all terms (e.g. fees up front opening cost franchisee
pays. ongoing royalties % Money franchisee continues to pay to franchisor) ,
Franchise Rule of FTC and FDD s at P. 329, Federal statutory protection, which requires the
franchisor to give prospective franchisees an offering circular – a detailed disclosure document –
at least ten days before any money changes hands, or before a franchisee commits to a purchase.
Franchise Rule’s disclosure document must provide info such as responsibilities and number of
franchisees have gone out of business. The document enables prospective investors to learn about
the business. If info is not true, FTC will bring action against the franchisor.
concerns of franchisee (e.g. geographic territory) vs. concerns of franchisor (quality), ok
good faith termination of franchise contracts by franchisor. Franchisor can terminate franchise if
there is good cause, or based on the occurrence of events agreed upon.
All videos and handouts.