Download Summary, Agency, Employment, and Labor Law: Exam Revision Notes and more Summaries Labour Law in PDF only on Docsity!
Business Law: Agency,
Employment, and Business
Organizations
Determining Status (Employee vs. Contractor)
Several factors determine whether someone is an employee or an independent contractor. These include the level of control exerted, the degree of supervision, who provides the tools, the type of payment, the required skill level, the nature of the business relationship, and the duration of the work. In the case of Petroplex Welders, the welders were deemed employees because they were subject to company rules.
"Work for Hire" Rule
For employees, the employer owns the work created. However, independent contractors retain ownership of their work unless a written agreement specifies otherwise. Stanley Kauffmann, a freelance writer, retained copyright to his work because there was no agreement transferring ownership.
Formation of the Agency Relationship
By Agreement
Agency relationships are most commonly formed by agreement, which can be oral or written, signifying consent. An example is hiring someone to mow the lawn. In the Nursing Home Papers case, a wife signing papers for her husband established a valid agency by implied consent.
By Ratification
An agency relationship can also be formed when a principal accepts an unauthorized act after it has occurred. An example is approving a sale after it happened.
By Estoppel
If a principal's conduct leads a third party to believe an agency relationship exists, agency by estoppel can be established. In Reidel v. Hospital, the hospital was held liable because the patient reasonably believed the doctor was an employee.
By Operation of Law
Duties of Agents and Principals
Agent's Duties to Principal
An agent owes the principal several duties. These include performance, requiring reasonable skill and care; notification, which involves sharing important information; loyalty, meaning no secret profits or conflicts of interest (as illustrated in Taser v. Ward, where preparing a competing business was permissible, but acting on it while employed was not); obedience, requiring adherence to lawful orders; and accounting, which involves keeping funds separate and reporting them properly.
Principal's Duties to Agent
A principal also owes duties to the agent. These include compensation, providing fair or agreed-upon pay; reimbursement, covering legitimate expenses; and indemnification, protecting against losses caused by the agent's mistakes.
Practice Case Recaps
James & Marilyn: An agreement was formed, but Scott worked independently, making him an independent contractor. Winona: She was classified as an independent contractor. Dimka Corp: Nadine breached her duty of loyalty by secretly buying land. Gett/Wade: No agency relationship existed, so Gett was not liable. Alice/Carl: There was a breach of loyalty, invalidating the contract. Hemmerling: The cab company's rules suggested employee status. Verchota: Breached the duty of loyalty. Ovalles: He was an independent contractor, so Cox was not liable. Standard Oil: The installers were contractors due to a lack of close control. Westmas/Creekside: Creekside was held liable. American Family: The treatment of agents like employees raised ethical and legal concerns.
Scope of Agent's Authority
A principal is liable only when the agent has proper authority.
Actual Authority
Actual authority can be express, meaning directly stated (oral or written). The Equal Dignity Rule states that if a contract must be written, the agent's authority must also be written. For example, oral authority to sell land is invalid unless ratified in writing. Exceptions exist for corporate officers, situations where the principal is present, or when signing is a mere formality. Actual authority can also be implied, meaning it is reasonably necessary to carry out express authority. For example, a store manager can hire staff or order inventory. However, implied authority cannot contradict
Unauthorized Acts
The principal is not liable for unauthorized acts; the agent is. For example, if an agent buys a truck without authority, the agent pays. The Implied Warranty of Authority makes an agent liable if they falsely claim authority. For example, an agent selling art without permission is liable. There is no liability if the third party knows the agent has no authority.
E-Agents
E-agents are software agents making online contracts. For example, in the event of an auto-order error without confirmation, the customer can cancel.
Liability for Torts and Crimes
Principal's Direct Fault
A principal is liable for their own negligence or wrongful orders. For example, letting an unlicensed driver use a company truck.
Principal's Authorization of Wrongdoing
Both parties are liable if the principal orders wrongdoing. For example, if a boss orders trespass, both are liable.
Agent's Misrepresentation
The principal is liable if the agent lies within their job role. Even without approval, liability can follow if the appearance of authority is real.
Agent's Negligence (Respondeat Superior)
The principal is liable for employee mistakes during work. A detour, or minor personal side-task, still holds the employer liable. However, a frolic, or major personal errand, does not. In Simon v. Farm Bureau, the company was liable because the worker was an employee.
Intentional Torts
The employer is liable if the conduct was job-related or the risk was known.
Independent Contractors
Generally, principals are not liable for the actions of independent contractors unless the task is hazardous, such as using explosives.
Criminal Acts
Agents are liable for their own crimes unless the employer helped or the law imposes liability.
Termination of Agency
By Act of Parties
Termination occurs if the time expires, the task is complete, there is mutual agreement, or revocation/renunciation. Wrongful termination may lead to damages. An agency coupled with interest cannot be revoked if the agent has a financial stake. Notice must be given to third parties to end apparent authority.
By Operation of Law
Termination automatically occurs upon death, insanity, bankruptcy, impossibility, or war.
Employment at Will
An employer/employee can end the relationship at any time unless exceptions apply.
Contract Theory
Handbooks/promises may imply job security.
Tort Theory
Misleading or harmful firings can lead to fraud or distress claims.
Public Policy
It is illegal to fire for lawful actions, such as whistleblowing.
Wages, Hours, and Layoffs
FLSA
The Fair Labor Standards Act sets rules on pay and hours.
Child Labor
Age-based restrictions exist on work types and hours.
Social Security/Medicare
Funded by payroll tax.
ERISA
The Employee Retirement Income Security Act regulates private pensions.
Employment Discrimination
Key Laws & Protected Classes
Title VII
Prohibits discrimination based on race, color, religion, gender, national origin, and sexual orientation.
ADEA
Protects workers age 40+.
ADA
Covers disabilities.
These laws apply to most U.S. employers with 15+ workers and U.S. companies abroad.
Types of Discrimination
Intentional (Disparate Treatment)
Direct unfair treatment. One must prove they are in a protected class, qualified, rejected, and someone outside the class was hired.
Unintentional (Disparate Impact)
Neutral policies that harm protected groups. Applicant pool or hiring rate tests are used (e.g., the 80% rule).
Reverse Discrimination
Bias against the majority (e.g., white males).
Religious
Employers must accommodate unless it causes hardship.
Gender
No bias in job roles or promotions; includes pregnancy and post-birth needs.
Transgender & Sexual Orientation
Protected under Title VII (e.g., Bostock v. Clayton County).
Constructive Discharge
Quitting due to unbearable conditions is considered wrongful termination.
Sexual Harassment
Quid pro quo involves job benefits for sexual favors. A hostile environment involves severe/unwelcome behavior. The employer is liable if a supervisor acted or failed to act.
Online Harassment
Offensive emails/social media can qualify as harassment.
Procedures & Remedies
File with the EEOC, leading to mediation or a "right to sue." Remedies include reinstatement, back pay, promotion, and capped damages. Retaliation is also illegal, including protecting those associated with a complainant.
Other Discrimination Laws
ADEA
Age must be the main reason for adverse action. It applies to employers with 20+ workers. No lawsuits are allowed by state employees.
ADA
A disability must limit major life activities; reasonable accommodation is required. Drug abusers/alcoholics are protected only if not using at work. Association with disabled persons is protected.
GINA
Genetic information cannot be used in employment.
Franchises
Buy into a brand's name and system.
Types
Distributorship
Sells a product (e.g., car dealership).
Chain-style
Same brand/process (e.g., Subway).
Manufacturing
Makes and sells a product (e.g., bottlers).
FTC Franchise Rule
Requires disclosure of costs, earnings, and rules.
Franchise Contracts
Cover fees, location, territory, and quality control.
UPA
The Uniform Partnership Act is the default law in most states.
Formation Tests
Sharing profits usually indicates a partnership. Control, contributions, and joint ownership also matter. In one case, a partner excluded from access led the court to rule that a partnership existed.
Rights and Duties
Equal management unless agreed otherwise. Equal profit/loss split unless set differently. Fiduciary Duties include care (no negligence) and loyalty (no secret deals). In Meinhard, exclusion from a real estate deal was a breach.
Liability
Joint Liability
All partners must be sued together.
Joint and Several
One partner can be sued for all.
New partners are only liable for new debts. For example, with a $600k debt, a new partner only risks their $100k contribution.
Dissociation & Termination
Dissociation
A partner leaves, and their authority ends.
Wrongful Dissociation
A breach makes the partner liable for damages.
The partnership continues or dissolves. Dissolution triggers winding up. Debts are paid, then partners, and any remainder is split.
Limited Partnerships (LPs)
General Partner
Manages and is fully liable.
Limited Partner
Invests only, no management, limited liability. Safe harbors allow advice and non-control roles.
LLPs and LLLPs
LLP
Partners are not liable for others' mistakes. Popular for law/accounting firms.
LLLP
Even general partners get liability protection.
FLLPs
All partners are family; common in farming.
Business Trust
Trustees manage, and profits go to beneficiaries.
Cooperative
Member-owned for shared benefits.
Corporate Basics
A separate legal person. Owners are shareholders with limited liability.
Personnel
Board
Manages and hires officers.
Shareholders
Elect the board and have a limited role in operations.
Types
Domestic/Foreign/Alien
Based on the state or country of formation.
Public/Private
Government vs. private ownership.
Business Organizations
Types of Corporations
A corporation can be structured in various ways. A private ownership corporation exists for profit. A nonprofit corporation does not distribute profits to owners. A close corporation has few shareholders and is often family-run. An S corporation features pass-through taxation and has a limited number of shareholders. A professional corporation is designed for licensed professionals. A benefit corporation aims to generate profits while also serving a social purpose.
Corporate Powers
Corporations possess different types of powers. Express powers are derived from the corporate charter and bylaws. Implied powers are reasonable actions necessary to carry out express powers, such as obtaining loans. Ultra vires actions are those beyond the corporation's powers, which are rare and can be legally challenged.
Formation of a Corporation
The formation process involves several steps. Filing articles of incorporation is followed by an organizational meeting and the creation of bylaws. A de jure corporation is properly formed according to the law. A de facto corporation has minor errors in its formation but operates in good faith. The principle of by estoppel treats an entity as a corporation to prevent injustice.
Piercing the Corporate Veil
Courts may hold owners personally liable by piercing the corporate veil. This occurs when owners mix personal and corporate funds, undercapitalize the corporation, or use the corporation for fraudulent purposes. An example is an LLC owner using business funds for personal spending, leading to the veil being pierced.
Corporate Financing
Corporations raise capital through various means. Common stock grants voting rights but is last in line for asset distribution.
Property Law
Types of Leases
Leases can be categorized based on their duration. A periodic lease renews automatically, such as a monthly lease. An at-will lease can be terminated at any time by either party. An at-sufferance lease occurs when a tenant remains on the property without the landlord's consent.
Nonpossessory Interests
These interests involve rights to land without ownership. An easement grants the right to use another's land. A profit grants the right to take resources from another's land. A license provides temporary permission to use land. These interests can be created by agreement, necessity, implication, or prescription. For example, using land for 20+ years can create a prescriptive easement.
Types of Insurance Agents
An agent works on behalf of the insurer. A broker works on behalf of the buyer.
Classifications of Insurance
Insurance can be classified into various types, including life, auto, homeowners', disability, liability, malpractice, key-person, and casualty insurance.
Insurable Interest
An insurable interest requires a stake in the person or property being insured at the time the policy is purchased. STOLIs (Stranger-Owned Life Insurance) are illegal because they lack this insurable interest.
Insurance Contract Details
The insurance contract must be legal, and the premium must be paid. Misrepresentation can void the contract. The effective date is when coverage begins, which may require a physical examination. A grace period (antilapse clause) allows for late payments without losing coverage. A coinsurance clause requires insuring property to 80% of its value for full recovery. Multiple insurance policies pay proportionally.
Interpretation of Insurance Contracts
Courts tend to favor the insured if the contract language is unclear. Exclusions must be specific.
Cancellation of Insurance
The insurer can cancel the policy for nonpayment, fraud, or license suspension, among other reasons. The insurer must provide notice of cancellation.
Duties of Parties
The insured must pay premiums, report claims, and cooperate with the insurer. The insurer must investigate claims, settle them, defend against lawsuits, and pay valid claims. Bad faith occurs when an insurer denies a claim without a reasonable basis, leading to potential damages.
Defenses Against Payment
Insurers may have defenses against paying claims, including fraud, lack of insurable interest, and illegal acts.
Types of Insurance Policies
Life insurance policies include whole life, term life, endowment, limited- payment, and universal life. Suicide and war are often exclusions. Beneficiaries can be changed unless their rights are vested. Fire and homeowners' insurance protect property, contents, and provide liability coverage. An occupancy clause may void coverage if the property is vacant. The insurer must be notified of any transfer of ownership, such as a home sale. Auto insurance includes liability, collision, and comprehensive coverage, as well as uninsured motorist, medical, and umbrella coverage. Business insurance includes general liability, product liability, and malpractice insurance. Workers' compensation is mandatory in most states.
