Employment Relations Issues
Chapter 4
TERMS
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Actual Authority
Re-assignment clause
Apparent Authority
Termination for just cause
Termination without cause
Breach of Contract
Restrictive covenant/Covenant not to compete
Canons of Interpretation of Contract Law
Employment at will
Formation of a Contract
Tor theories and Employment
Contract
Compensatory damages
Mitigation of damages
Liquidated damages and penalty provision
Rescission
Restitution
Promissory estoppel
Management Contexts,
Relevant Laws, and Cases
Basic Principles of How Interpret
Contract
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Are called:
Canons of interpretation:
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1. As an integrated whole- in a way that makes sense as a whole.
Courts read sections to see if cohesion through the document.
They read the clauses of the document to see if they are tied in.
The document should reflect agreement in all its parts.
2. The courts interpret a contract most strictly against the party
that drafted the document in the event of ambiguity.
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Perspective: when you negotiate or draft a document use the worst case
scenario.
Fundamental Aspects of a Contract
A contract is a promise, or set of
promises. There are (4) aspect of a
contract:
• Agreement-offer and acceptance
• Consideration-exchange of value
• Capacity-legal competence of
parties to enter a contractual
agreement.
• Legality-to be enforceable, it must
not violate laws.
Oral vs. Written Contracts
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Good managerial practice: Put
every contract in writing.
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Under certain circumstances,
courts will not enforce oral
contracts.
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Statutes of Frauds—states
require some types of contracts
to be in writing.
1.
agreement for sale of land
2. Contract for sale of goods ($500
or more)
3. Contracts that cannot be
performed within one year of
contract.
Contract Damages for Breach of Contract: the courts
doesn’t punish the party that breach but try to compensate the
innocent party to the promise of the contract.
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Compensatory damages-direct loss
Specific performance-fulfill terms
of contract p. 54
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Liquidated damages provisionhave an approximate damages
p.68
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Penalty provision-must be
reasonable
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Courts will not uphold penalty
provision in a contract.
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Punitive damages-compensation
in excess
Rescission-undoing the contract,
p.55
Restitution-returning the goods
or property, p.56
Promissory estoppel-need (3)
elements p.56 (78)
1. an expected promise induce
reliance
2. Reliance on that promise
3. detriment occurs when
promise doesn’t occurs
BARGINING POWER
Disparity of Bargaining Power
• A contract is written exclusively by one party; the other party
is forced to accept terms.
• No bargaining.
• Example: National Letter of Intent between an institution
and a student-athlete (who cannot negotiate content).
• Refer to page 56-57
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Authority to
Contract
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Actual authority – In agency law, the
principal conveys to the agent what his
or limits of authority may be.
Apparent authority – An instance when
the principal has somehow conveyed to
a third party that the agent has
authority to act although he or she does
not have actual authority.
Focus Case- p.58
Competitive Advantage
Strategies
Contract Law
 Use the worst case scenario when developing contracts.
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 Make sure contracts serve the interests of your
organization.
 Put all contracts in writing.
 Avoid making promises that go beyond what the written
agreement conveys.
 Enforce the limits of actual authority.
Employee Contract
Provisions
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Duties and responsibilities
Reassignment Clause- (Focus Case p.60)
Compensation (Focus Case p. 62)
Terms of employment
Clauses related to termination
Restrictive covenant/covenant not to
compete- restrict persons from working
with competitor. (p.69)
Miscellaneous provisions
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Termination for just cause:
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Clauses Related to
Termination
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Morals clause: (p. 64)
Behavior that has an adverse effect on
an individual or organization’s image
Termination without cause:
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Wrongful termination- someone has
been fired contrary to terms of
contract.
Competitive Advantage Strategies
Employment Contracts
• Develop contracts with care and cover all necessary
provisions.
• Give particular attention to termination clauses and
liquidated damages provisions.
• Delineate prohibited behavior and make sure it’s understood.
• Specify whether an employee can be reassigned to another
position within the organization.
Employment at Will
 Employer may fire an employee at any time, for any
reason (or for no reason).
 Employee can quit at any time, for any reason.
 In practice, the rule favors employers more than
employees.
 Refer to page (71) Frazier v. University of the District
of Columbia
Exceptions to Employment at Will
Based on contract law:
Implied contracts
Covenant of good faith and fair dealing
Based on public policy:
Employment discrimination
Whistleblowing (p. 73)
Cooperation in an investigation against the company
Submission of unfair labor practice charges
Complaints about safety hazards/violations
HEAD COACHES
TORT THEORIES AND EMPLOYMENT
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Tort Theories and
Employment
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Defamation- tort that protects one’s
reputation
Qualified privilege-in good faith
employers can disclose information of
employee’s work performance.
Negligent misrepresentation- information
resulting in harm
Fraud-induce action by another that leads
to harm
Tortious interference with contractual
relations- prohibit improper interference
with existing contracts.
Competitive Advantage Strategies
Tort Theories and Employment
• When giving employment references, stick to the facts
contained in employees’ files.
• Give a balanced reference when disclosing information
about an employee—provide both strengths and
weaknesses.
• Do not try to convince a recruit to breach an existing
employment contract.
1. Whenever you begin to draft a contract or start a negotiation, you should take the perspective of which of the following?
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a. The integrated whole
b. The worst case scenario
c. The best case scenario
d. Enhancing ambiguity
2. The formation of a contract has which of these four fundamental aspects?
a. Offer, consideration, capacity, and authority
b. Acceptance, capacity, authority, and integration
c. Offer, rescission, authority, and capacity
d. Agreement, consideration, capacity, and legality
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3. In a coaching contract, a coach may often be compensated beyond base salary with additional benefits. This added compensation is known as
__________.
a. Perquisites (perks)
b. Liquidated damages
c. Just cause compensation
4. Which of the following is the practice in which employment has no specified duration and the employer may fire the employee at any time,
for any reason or for no reason?
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a. An illegal employment practice
b. Employment at will
c. Inequitable employment
d. Employment ambiguity
5. Many states have passed __________ providing that employees who report illegal activities allegedly committed by their employer shall not
be subject to discrimination or retaliation by the employer.
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a. Good faith and fair dealing statutes
b. Non-reassignment statutes
c. Restrictive covenant statutes
d. Whistleblower statutes
6. Which of the following prohibits improper interference with existing contracts?
a. Tortious interference with contractual relations
b. Misrepresentation
c. Contractual freedom
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Chapter Questions
1. Whenever you begin to draft a contract or start a negotiation, you should take the perspective of which of the following?
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a. The integrated whole
b. The worst case scenario
c. The best case scenario
d. Enhancing ambiguity B
2. The formation of a contract has which of these four fundamental aspects?
a. Offer, consideration, capacity, and authority
b. Acceptance, capacity, authority, and integration
c. Offer, rescission, authority, and capacity
d. Agreement, consideration, capacity, and legality D
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3. In a coaching contract, a coach may often be compensated beyond base salary with additional benefits. This added compensation is known as
__________.
a. Perquisites (perks)
b. Liquidated damages
c. Just cause compensation
A
4. Which of the following is the practice in which employment has no specified duration and the employer may fire the employee at any time,
for any reason or for no reason?
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a. An illegal employment practice
b. Employment at will
c. Inequitable employment
d. Employment ambiguity
B
5. Many states have passed __________ providing that employees who report illegal activities allegedly committed by their employer shall not
be subject to discrimination or retaliation by the employer.
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a. Good faith and fair dealing statutes
b. Non-reassignment statutes
c. Restrictive covenant statutes
d. Whistleblower statutes
D
6. Which of the following prohibits improper interference with existing contracts?
a. Tortious interference with contractual relations
b. Misrepresentation
c. Contractual freedom A
SUMMARY
• 1. Review all terms
• 2. Review Matching Questions
• 3. Review the topic of the (5) cases done in class and it’s
meaning.