1. Unit 7 Business Organizations Objectives Describe the difference between an employee and an independent contractor.Describe the difference between an employee and an independent contractor. Analyze a situation where an employer may be liable for the acts of an employee.Analyze a situation where an employer may be liable for the acts of an employee. Know when an employer is liable for employment discrimination.Know when an employer is liable for employment discrimination.

2. Chapter 22 Agency Relationships

3. Introduction Agency= Principal and Agent. Understanding agency is crucial to understanding the legal environment of business. Principals use agents to be able to conduct multiple business operations simultaneously in various locations. The principal has the right to control the agent in matters entrusted to the agent.

4. Agency is a “fiduciary” relationship based on trust and confidence. Distinguish Employee vs. Independent Contractor Relationships. Agency Relationships Employer Employee Independent Contractor

5. x Is there a great degree of skill required? x Does the Employer exercise a great degree of control over the details of the work? I.C. E’ee Factors Courts Consider: (“X” = Yes) x Is the worker engaged in an occupation or business distinct from Employer? x Is the work usually done under Employer’s supervision? x Does Employer provide the tools? ? How is the worker paid and how long has he been employed? Employee vs. Independent Contractor Analysis

6. Employer Liability Determining whether the worker is an employee or an independent contract affects liability of Principal/Employer. –CASE 22.1 Nu-Look Design, Inc. v. Commissioner of Internal Revenue (2004). –Tax Liability: Employer liable if employee. –Contract Liability: Employer not necessarily liable. –Tort Liability: Employer liable for torts of employee within scope of employment. Employee Status and “Works for Hire”.

7. How Agency Relationships Are Formed Consensual Agreement. No consideration required. Principal needs contractual capacity, Agent does not. Can be for any legal purpose.

8. Types of Agencies Agency by Agreement. –Formed through express consent (oral or written) or implied by conduct. Agency by Ratification. –Principal either by act or by agreement ratifies conduct of a person who is not in fact an agent.

9. Types of Agencies Agency by Estoppel. –Principal causes a third person to believe that another person is the Principal’s Agent, and the third person acts to her detriment in reasonable reliance on that belief. Agency by Operation of Law. –Agency based on social duty is formed in certain situations when the Agent is unable to contact the Principal. –Necessaries for family. –Emergency.

10. Performance: reasonable diligence and skill (special skills). Notification to P. Loyalty (no conflict of interest). –CASE 22.2 American Express Financial Advisors, Inc. v. Topel (1999). Obedience. Accounting. Agent’s Duties to the Principal

11. Compensation (Express or Implied). Reimbursement and Indemnification. Cooperation. Provide safe working conditions. Principal’s Duties to Agent

12. Agent’s Authority Principal is liable for acts entered into by Agent when she gives Agent either actual or apparent authority: –Actual Authority: express or implied. –Apparent Authority: estoppel, emergency. –Ratification.

13. Express Authority Can be oral or written. –“Equal Dignity Rule”: if law requires written contract, Agent’s authority must be in writing. Failure to comply with the rule renders contract voidable. Exceptions: Officer acting for Corporation. Agent acts in Principal’s presence. Power of Attorney (ordinary v durable).

14. Implied Authority Inferred or conferred by custom, Agent’s position or what is reasonably necessary to carry out Agent’s express authority. What the Agent reasonably thinks the Principal means.

15. Apparent Authority Principal, by either word or act, causes 3rd party to reasonably believe that Agent has authority to act for Principal. If 3rd party changes legal position by relying on Principal’s representations, Principal is estopped from denying Agent had authority to contract.

16. Ratification Authority 1. Agent must act on behalf of Principal. 2. Principal must affirm entire deal. 3. Principal must affirm before 3rd party withdraws from transaction. 4.Principal and 3rd party must have legal capacity to contract when Agent made the deal. 5. Principals must know all the material facts involved in the transaction.

17. Liability for Contracts Principal’s liability for Agent’s contract depends on whether Agent’s actions were authorized or unauthorized. Principals are classified as: –Disclosed: identity known to 3rd party. –Partially Disclosed: 3rd party knows he is dealing with Agent, but doesn’t know Principal’s identity. –CASE 22.3 McBride v. Taxman Corp. (2002). –Undisclosed: 3rd party does not know he is dealing with an Agent, and Principal’s identity is totally unknown.

18. Liability: Authorized Acts Disclosed or partially disclosed Principal is liable to 3rd party if Agent acts within scope of authority. Agent has no liability to 3rd P for disclosed Principal’s non-performance. (Agent may be liable if Principal is partially disclosed).

19. Liability: Undisclosed Principal If undisclosed Principal, no liability unless: –Principal expressly excluded. –Contract is a negotiable instrument. –Agent’s performance is personal. –3rd party would have contracted if he knew the Principal’s identity.

20. Unauthorized Acts Unauthorized acts outside of Agent’s express, implied or apparent authority. If Agent has no authority, Principal is not liable, but Agent is liable.

21. Liability for E-Agents Authorized versus Unauthorized Acts. The Uniform Electronic Transactions Act. –E-Agents may enter into binding agreements on behalf of the principal. –An E-Agent must provide confirmation of order to prevent errors.

22. Principal’s Liability For Agent’s Torts Agent is liable to 3rd party for his own torts. Principal may be liable for Agent’s torts if they result from: –Principal’s own tort. –Principal’s authorization of tort. –Agent’s unauthorized but fraudulent conduct made within scope of agency. –Respondeat Superior 

23. Liability for Agent’s Negligence Applies only to Employer-Employee relationships. Principal/Employer is vicariously liable for Agent/Employee’s negligent torts if committed within the Agent’s “course and scope of employment” (respondeat superior). Distinction between Detour vs. Frolic.

24. Principal Liability: Scope of Employment XDid the act involved a serious crime? XDid Employer have reason to know Employee would do the act? XDid Employer furnish instrumentality (tools)? XDid act advance Employer’s interests? XWas act commonly performed by Employees? ??The Time place and purpose of act (factually based) XWas Employee’s act authorized by Employer? Employer NOT Liable Employer Liable Factors: For Principal to Be Liable, Agent’s Act must have occurred within the Course and Scope of Employment. (X = Yes) FrolicDetour Was the act a detour or frolic?

25. Liability for Agent’s Intentional Torts Principal liable for intentional torts committed within the scope of employment. Employee is a tortfeasor as well. Employer is liable for Employee’s acts which Employer knew or should have known the Employee had a propensity to commit.

26. Liability for Independent Contractor’s Torts First determine whether worker is employee or independent contractor. General rule: Employer is not liable for acts of independent contractors because Employer no right to control. Exception: hazardous activities Independent Contractor is liable for her own torts.

27. Worke r P Generally Not Liable (unless strict liability) Outside CSE-P Not Liable Within CSE -P Liable “ Course and Scope of Employment” Independent Contractor Employee Factors Principal Liability: Review

28. Liability for Agent’s Crimes General Rule: Agent is liable, Principal is not, unless: –Principal authorized or participated in crime. –Some jurisdictions hold Principal liable for violating statutes.

29. How Agency Relationships Are Terminated Agency can be terminated by: –An Act of the Parties; or –By Operation of Law. Once agency terminated Agent has no actual authority to bind the Principal, but may have apparent authority to bind Principal.

30. Termination By Act of the Parties Lapse of Time. Purpose Achieved. Occurrence of a Specific Event. Mutual Agreement. Termination by One Party. Notice of Termination.

31. Termination By Operation of Law Death or Insanity of either Principal or Agent: automatic. Impossibility. Changed Circumstances. Bankruptcy. War.

32. Employment Law Chapter 23

33. Employment-at-Will Historically, employment law was governed by the common law doctrine of “employment at will” where either employer or employee could terminate the relationship at any time, for any reason. Today employment law is heavily regulated by state and federal statutes.

34. The doctrine of employment-at-will allows the employer and the employee to terminate employment at any time, for any reason, without liability. Some states however recognize one or more judicial exceptions to this rule, while some states recognize none.  Wrongful Discharge

35. Exceptions to Employment-at-Will Exceptions to the Employment at Will Doctrine: –Contract Exceptions: An implied contract exists between employer and employee. Oral agreements may become part of the implied contract. –Tort Exceptions: Wrongful discharge, defamation may be actionable. –Public Policy Exceptions. –Whistleblowing.

36. Worker Health and Safety The Occupational Safety and Health Act. (OSHA). –The fundamental federal law aimed toward safety in the workplace. –Enforcement is by OSHA, NIOSH, and the OSHRC. –Procedures and Violations: Employers with 11 or more employees required to keep records.

37. Worker Health and Safety State Workers’ Compensation Laws. –These laws reduce employer liability to employees for workplace injuries, and provide a measure of assurance that workplace injuries will be compensated, regardless of the solvency of the employer, by: –Requiring that injured employees make a claim against the employer’s workers’ compensation insurance policy, instead of suing the employer. –Requiring most employers to carry workers’ compensation insurance.

38. Title VII Of The Civil Rights Act of 1964 Title VII prohibits discrimination in employment on the basis of race, sex, color, religion, and national origin. “Sex” now includes pregnancy. In addition to prohibiting religious discrimination, employers must reasonably accommodate an employee’s religious practices. Enforcement of Title VII by EEOC.EEOC

39. Intentional vs. Unintentional Discrimination Intentional (“Disparate-Treatment”) Discrimination. For prima facie case, applicant must prove: –She is member of a protected class; –Applied, qualified and rejected for job; and –Employer continued to seek applicants. Unintentional (“Disparate Impact”) Discrimination. –No-protected applicant sues Employer who tries to integrate members of protected classes into workplace.

40. Discrimination Based on Race, Color and National Origin Title VII prohibits employment policies or intentional/ negligent discrimination on basis of race, color or national origin. Company policies that discriminate are illegal, unless (except for race) they have a substantial demonstrable relationship to realistic qualifications for job.

41. Discrimination Based on Religion Employers must “reasonably accommodate” the “sincerely held’ religious practices of its employees, unless to do so would cause undue hardship to employer’s business.

42. Discrimination Based on Gender Title VII prohibits sex discrimination in the work place. Employers are prohibited from classifying jobs as male or female or from advertising such, unless employer can prove gender is essential to the job. Plaintiff must show gender was determining factor in hiring, firing or lack of promotion. Constructive Discharge. CASE 23.4 Conway-Jepsen v. SBA (2004).

43. Gender Discrimination Two types of sex discrimination: –Differential treatment. –Sexual harassment, which itself, exists in two varieties: Hostile Work Environment. Quid Pro Quo.

44. U.S. Supreme Court has interpreted Title VII’s prohibition against sex discrimination to include a prohibition against sexual harassment. There are currently two forms of recognized sexual harassment: –Quid Pro Quo. –Hostile Work Environment. Sexual Harassment

45. Hostile environment occurs when workplace is “permeated” with discriminatory intimidation, ridicule, insult so severe to alter the conditions of the victim’s employment. The conduct in the workplace must be offensive to a reasonable person as well as to the victim, and it must be severe and pervasive. Hostile Work Environment

46. Harassment by Supervisors Quid Pro Quo harassment involves the demands for sexual favors by a supervisor from a subordinate, in exchange for some workplace benefit. –See Faragher v. City of Boca Raton (1998) and Burlington Industries v. Ellerth (1998). Under certain conditions, an employer may be liable for the quid pro quo harassment committed by its supervisory employees.

47. Harassment by Co-Workers and Nonemployees Employer generally liable only if employer knew or should have known and failed to take action. –Employee notice to supervisor is notice to Employer under agency law. Employers may also be liable for harassment by non-employees. Same-sex harassment also violates Title VII.

48. Online Harassment Company email systems. Company chat rooms. Posting sexually explicit images on company computer systems, screen savers, etc. Employees will generally not be liable if prompt action taken.

49. Remedies under Title VII Liability may be extensive. Plaintiff may receive: –Reinstatement. –Back Pay. –Retroactive Promotions; and –Damages.

50. Discrimination Based on Age (ADEA) The Age Discrimination in Employment Act (ADEA) protects individuals over the age of 40 from workplace discrimination that favors younger workers. Plaintiff must show: –He was member of protected age group, –Was qualified for the position from which he was discharged, and –Was discharged under circumstances that inferred discrimination.

51. Discrimination based on Disability (ADA) The Americans with Disability Act (ADA) requires employers to offer reasonable accommodation to employees or applicants with a “disability” who are otherwise qualified for the job they hold or seek. The duty of reasonable accommodation ends at the point at where it becomes an undue hardship.

52. ADA To prevail on a claim under ADA, plaintiff must show she: –Has a “disability.” –Is otherwise qualified for the employment in question; and –Was excluded from employment solely because of the disability. –Workforce must be more than 15 employees Plaintiff must first exhaust administrative relief with EEOC.

53. ADA: What is a “Disability”? ADA defines disability as: –Physical or mental impairment that “substantially limits one or more of major life activities; or –A record of such impairment; or –Being regarded as having such an impairment. Determination is decided on a case-by- case basis.

54. If an employee with a disability can perform the job with reasonable accommodation, without undue hardship on the employer, the accommodation must be made. –Examples: wheelchair ramps, flexible working hours, improved training materials. Job Applications and Pre-Employment Physical Exams. Hostile-Environment Claims. ADA: “Reasonable Accommodation”

55. Defenses to Employment of Discrimination There are four basic types of defenses to employment discrimination claims. –Business necessity. –Bona fide occupational qualification. –Seniority Systems. –After-acquired evidence of employee misconduct.

56. Business Necessity Defense The business necessity defense requires the employer to demonstrate that the imposition of a job qualification is reasonably necessary to the legitimate conduct of the employer’s business. Business necessity is a defense to disparate impact discrimination.

57. BFOQ Defense The bona fide occupational qualification defense requires an employer to show that an particular skill is necessary for the performance of a particular job. The BFOQ defense is used in cases of disparate treatment discrimination.

58. Seniority System Defense A seniority system is one that conditions the distribution of job benefits on the length of time one has worked for an employer. A seniority system can be a defense only if it is a bona fide system, not designed to evade the effects of the anti-discrimination laws.

59. After-Acquired Evidence After-acquired evidence refers to evidence of misconduct, committed by an employee who is suing an employer for employment discrimination, that is uncovered during the process of discovery conducted in preparation for a defense against the suit. While it may serve to limit employee recovery, it does not act as an absolute defense for the employer.

60. Affirmative Action Affirmative action programs go one step beyond non-discrimination: they are designed to “make up” for past patterns of discrimination by giving preferential treatment to protected classes. AA has led to “reverse discrimination” cases which violate equal protection. –University of California v. Bakke (1978). –Adarand Constructors v. Pena (1995). –Hopwood v. State of Texas (1996). –Recent Supreme Court decisions 

61. Latest Supreme Court Decisions Gratz v. Bollinger (2003). Awarding 20 points to underrepresented minorities violated equal protection clause. Grutter v. Bollinger (2003). Considering race as a flexibile ‘plus’, however, is constitutional. Distinction: Grutter was flexible, not mechanical.