Business Law Summary: Agency, Employment, Business Organizations PDF

17 pag. Document shared on https://www.docsity.com/ 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 degre...

17 pag. Document shared on https://www.docsity.com/ 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. Document shared on https://www.docsity.com/ 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 Document shared on https://www.docsity.com/ direct instructions. For example, a manager told not to hire has no such authority. Apparent Authority Apparent authority is based on a third party's belief due to the principal's behavior. For example, if a salesperson collects payments without permission but the company doesn't stop her, the company may be liable. The case of Lundberg v. Church Farm illustrates this, where the principal was liable due to the appearance of authority. Estoppel can prevent a principal from denying an agency if they caused a third party's belief. However, in Dearborn West Village, where an agent acted without approval, no estoppel was found. Emergency Powers An agent can act to protect property or rights if the principal cannot be reached. For example, a supervisor can authorize emergency medical treatment. Ratification Ratification occurs when a principal accepts an unauthorized act after the fact. Requirements include the agent acting for a known principal, full knowledge by the principal, full approval, legal capacity of the principal, ratification before withdrawal by the third party, and proper procedure. Liability for Contracts Liability for contracts depends on authorization and the principal's identity disclosure. Disclosed If the principal's identity is known, only the principal is liable. Partially Disclosed If the third party knows the agent works for someone, both the agent and principal can be liable. In one case, the agent didn't name the principal, resulting in liability for both. Undisclosed If the third party doesn't know the principal exists, both are liable. In one case, the buyer sued both the agent and the unknown car owner after a defect. The principal must indemnify the agent if the agent is held liable. Document shared on https://www.docsity.com/ 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. Document shared on https://www.docsity.com/ 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. Document shared on https://www.docsity.com/ Minimum Wage The higher of the federal or state minimum wage applies. Tipped Workers May be paid $2.13/hr if tips cover the rest. Tip Pooling Allowed if full minimum wage is paid. Overtime 1.5x pay is required after 40 hrs/week unless exempt. In Encino Motorcars, service advisors were deemed exempt. State Overtime Rules May require rest days, such as in California. WARN Act The Worker Adjustment and Retraining Notification Act requires 60 days' notice for mass layoffs (100+ workers). Family and Medical Leave FMLA The Family and Medical Leave Act provides 12 weeks of unpaid leave for serious health/family reasons. It applies to companies with 50+ employees and workers with 12 months of tenure. Health insurance must continue, and the same or an equal job must be restored. Violations can result in lost wages, court costs, and double damages. Health, Safety, and Income Security OSHA The Occupational Safety and Health Administration sets workplace safety rules. In one case, an unsafe machine made the employer liable even if the employee erred. Workers' Compensation Covers injuries at work, preventing lawsuits. Document shared on https://www.docsity.com/ 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. Document shared on https://www.docsity.com/ 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. Document shared on https://www.docsity.com/ USERRA The Uniformed Services Employment and Reemployment Rights Act protects military service members, has broad employer coverage, and allows "for cause" firing only. Defenses & Policies Business Necessity Justifies neutral practices (e.g., bilingual job requirements). BFOQ Bona Fide Occupational Qualification means certain jobs may require specific traits (gender okay, race never). Seniority Systems Valid if non-discriminatory. After-Acquired Evidence Reduces damages if misconduct is found post-suit. Affirmative Action Allowed if narrowly tailored and temporary. States can ban it. Small Business Basics Choose a business form based on ease, liability, taxes, and capital needs. Must register the name, licenses, permits, and follow zoning/employment laws. Protect IP by registering trademarks and guarding trade secrets. Sole Proprietorships Pros Easy to form, full control, personal taxes only. Cons Unlimited personal liability, hard to raise funds, ends on owner's death. An example is a golf shop injury, where the owner's personal property is at risk. Document shared on https://www.docsity.com/ 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. Document shared on https://www.docsity.com/ 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. Document shared on https://www.docsity.com/ LLC Basics A hybrid of a corporation and partnership. Pros Limited liability, pass-through taxes, flexible structure. Cons State laws vary. Formation File articles of organization. The name must include "LLC." Preformation contracts can be ratified post-creation. Management Member-managed (default) All members manage. Manager-managed Selected managers control the business. Fiduciary duties may differ by state. Operating Agreement Covers profit split, management, transfer, meetings, and buyouts. If absent, default state law applies. Dissociation & Dissolution A member leaving leads to a buyout unless wrongful. Dissolution occurs by vote, court, or agreement. It ends when the project ends. Syndicate An investment group (e.g., for stadiums). Joint Stock Company Shares exist, but there is personal liability. Document shared on https://www.docsity.com/ 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. Document shared on https://www.docsity.com/ 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. Document shared on https://www.docsity.com/ Transfer of Ownership Real estate sales require a deed. The closing involves exchanging the deed for payment, often held in escrow. The title must be marketable, meaning it is clean and clear of encumbrances. A warranty deed offers the strongest protection to the buyer. A quitclaim deed transfers whatever interest the seller possesses. Recording the deed provides public notice of the transfer. Adverse Possession Ownership can be gained through long-term unauthorized use of property. The use must be actual, open, exclusive, hostile, and continuous. An example is farming someone else's land for 21 years. Government Limitations on Property Rights The government can impose limitations on property rights. Eminent domain allows the government to take land for public use with compensation, including public projects and sometimes economic development. Restrictive covenants are private land-use rules, such as prohibiting commercial buildings. Zoning laws limit land use by category, such as residential or commercial, with variances allowed for hardship. Landlord-Tenant Law This area governs the relationship between landlords and tenants. The tenant has the right to possess and use the property. The landlord must provide quiet enjoyment, meaning they cannot interfere with the tenant's use. Eviction must be carried out properly; wrongful eviction occurs if the tenant is forced out improperly. The landlord must maintain the property in a livable condition. Rent can be withheld if the premises are uninhabitable. Transfer of Lease An assignment involves transferring the entire lease to another party. A sublease involves a partial transfer, with the original tenant remaining liable. Termination of Lease The lease ends at the end of the term or if the property is abandoned. The landlord must mitigate damages by attempting to re-rent the property. Insurance Key Insurance Concepts A policy is the insurance contract. A premium is the payment for insurance coverage. The insurer is the insurance company. The insured is the person covered by the policy. Document shared on https://www.docsity.com/ 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. Document shared on https://www.docsity.com/ 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. Document shared on https://www.docsity.com/