The Legal Environment of Business 9th ed. Notes
The Legal Environment of Business 9th ed. Notes MGMT 246 - 03
Cal State Fullerton
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Chapter 20 Agency 1 Agency Relationships A In a principalagent relationship the parties have agreed that the agent will act on behalf and instead of the principal in negotiating and transacting business with third parties The word fiduciary used as a noun refers to a person having duty created by his or her undertaking to act primarily for another s benefit in matters connected with the undertaking Used as an adjective it means that the relationship involves trust and confidence Employees who deal with third parties are agents Any sale of goods by a salesperson to a customer is binding on the principal Independent contractors are not employees because those who hire them have no control over the details of their work performance The relationship between a principal and an independent contractor may or may not involve an agency relationship How a court decides whether a particular worker is an employee or an independent contractor can have a significant effect on the rights and liabilities of the parties a Courts follow a certain criteria of questions when deciding how much does the employer exercise over the details of the work is the worker engaged in an occupation or business distinct from that of the employer is the work usually done under the employer s direction or by a specialist without supervision does the employer supply the tools at the place of work what is the method of payment time period or completion of job and what degree of skill is required of the worker i Workers may benefit from having employee status for tax purposes and to be protected under certain employment laws Federal statutes governing employment discrimination apply only when an employeremployee relationship exists ii Whether a worker is an employee or an independent contractor can also affect the employer s liability for the worker s actions b The IRS has established its own criteria for determining whether a worker is an independent contractor or an employee the most important being the degree of control the business exercises over the worker Even when a firm has classified a worker as an independent contractor the IRS may decide that the worker is actually an employee 0 Under the Copyright Act any copyrighted work created by an employee within the scope of their employment at the request of the employer is a work for hire The employer owns the copyright to the work unless the worker is an independent contractor 2 Formation of the Agency Relationship A Agency relationships are normally consensual come about by voluntary consent and agreement between the parties A person must have contractual capacity to be a principal An agency relationship can be created for any legal Chapter 20 Agency purpose and can arise in four ways by agreement of the parties by ratification by estoppel and by operation of law B Most agency relationships are based on an express or implied agreement that the agent will act for the principal and that the principal agrees to have the agent so act C Sometimes a person who is not an agent or is an agent acting outside the scope of their authority may make a contract on behalf of another and is then acting as a principal If the principal approves or affirms that contract by word or action an agency relationship is created by ratification D When a principal causes a third party to believe that another person is the principal s agent and the third party acts to their detriment in reasonable reliance on that belief the principal is estopped to deny prevented from denying the agency relationship Deeds or statements of the principal are what create an agency by estoppel E Courts may find an agency relationship in the absence of a formal agreement such as in family relationships or emergency situations if an agent cannot contact the principal and failure to act would cause the principal substantial loss the agent may take steps beyond the scope of their authority 3 Duties of Agents and Principals A Once the principalagent relationship has been created both parties have duties that govern their conduct In a fiduciary relationship each party owes the other the duty to act with the utmost good faith B Agents generally owe the principal five duties performance notification loyalty obedience and accounting a An implied condition in every agency contract is the agent s agreement to use reasonable diligence and skill in performing the work When an agent fails to perform their duties liability for breach of contract may result i The degree of skill or care required of an agent is usually that expected of a reasonable person under similar circumstances ordinary care ii Not all agency relationships are based on contract sometimes an agent can act gratuitously without payment A gratuitous agent cannot be liable for breach of contract because there is no contract they are only subject to tort liability They still however must perform in an acceptable manner and is subject to continue to perform in an acceptable manner and is subject 0 the same standards of care and duty to perform as other agents b An agent is required to notify the principal of all matters that come to their attention concerning the subject matter of the agency known as the duty of notification or duty to inform The law generally assumes that the principals is informed of any information acquired by the agent that is relevant to the agency regardless of whether they actually do or not Chapter 20 Agency 0 Loyalty is one of the most fundamental duties in a fiduciary relationship The agent has the duty to act solely for the benefit of their principal and not in the interest of the agent or a third party It also means that any information or knowledge acquired through the agency relationship is confidential d The duty of obedience refers to an agent s duty to follow all lawfully and clearly stated instructions of the principal when acting on behalf of the principal Any deviation from such instructions is a violation of this duty e Unless the agent and principal agree otherwise the agent must keep and make available to the principal an account of all property and funds received and paid out on the principal s behalf The agent has a duty to maintain a separate account for the principal s funds and must not intermingle these funds with the agent s personal funds C The principal has certain duties to the agent compensation reimbursement and indemnification cooperation and safe working conditions a When a principal requests certain services from an agent the agent reasonably expects payment so the principal has a duty to pay the agent for services rendered b The principal has a duty to reimburse the agent for any funds disbursed at the principal s request and for any necessary expenses incurred in the course of the reasonable performance of their agency duties 0 A principal has a duty to cooperate with the agent and to assist the agent in performing their duties When a principal grants an agent an exclusive territory the principal creates an exclusive agency in which the principal cannot compete with the agent or appoint or allow another agent to compete d Common law requires the principal to provide safe working premises equipment and conditions for all agents and employees When the agent is an employee the employer s liability is frequently covered by state workers compensation insurance D For every duty of the principal the agent has a corresponding right When one party to the agency relationship violates their duty to the other party the remedies available to the nonbreaching party arise out of contract and tort law 4 Scope of Agent s Authority A The liability of a principal to third parties with whom an agent contracts B depends on whether the agent had the authority to enter into legally binding contracts on the principal s behalf An agent s authority can be actual express or implied or apparent If an agent contracts outside the scope of their authority the principal may still be liable by ratifying the contract Express authority is authority declared in clear direct and definite terms and can be given orally or in writing Chapter 20 Agency a The equal dignity rule requires that if the contract being executed is or must be in writing the agent s authority must also be in writing Failure to comply with this rule can make a contract voidable at the option of the principal There are certain exceptions to the rule b Giving an agent a power of attorney confers express authority It is a written document and is usually notarized A power of attorney can be special or general C An agent has the implied authority to do what is reasonably necessary to carry out express authority and accomplish the objectives of the agency Authority can also be implied by custom or inferred from the position of the agent occupies D Actual authority arises from what the principal makes clear to the agent Apparent authority arises from what the principal causes the third party to believe An agent has apparent authority when the principal causes a third party reasonably to act even though the agent has no express or implied authority E When an unforeseen emergency demands action by the agent to protect or preserve the property and rights of the principal but the agent is unable to communicate with the principal the agent has emergency power F Ratification is when the principal affirms or accepts responsibility for an agent s unauthorized act There are requirements for ratification the agent must have acted on behalf of an identified principal who subsequently ratifies the action the principal must know all of the material facts involved in the transaction the principal must affirm the agent s act in its entirety the principal must have the legal capacity to authorize the transaction at the time the principal ratifies the principal s ratification must occur before the third party withdraws from the transaction and the principal must observe the same formalities when ratifying the act as it would have been required to authorize it initially 5 Liability for Contracts A Liability for contracts formed by an agent depends on how the principal is classified and on whether the actions of the agent where authorized or unauthorized Principals are classified as disclosed partially disclosed or undisclosed a A disclosed principal is a principal whose identity is known by the third party at the time the contract is made by the agent b A partially disclosed principal is a principal whose identity is not known by the third party but the they know that the agent is or may be acting for a principal at the time the contract is made 0 An undisclosed principal is a principal whose identity is totally unknown by the third party and they had no knowledge that the agent is acting in an agency capacity at the time the contract is made B If an agent acts within the scope of their authority the principal is normally obligated to perform the contract regardless of whether the principal was Chapter 20 Agency disclosed partially disclosed or undisclosed Whether the agent may be held liable under the contract however is dependent upon those factors a If the principal is disclosed the agent has no contractual liability for the nonperformance of the principal or the third party If the principal is partially disclosed the agent is also treated as a party to the contract and the third party can hold the agent liable for contractual non performance b When neither the fact of an agency relationship nor the identity of the principal is disclosed the undisclosed principal is bound to perform just as if the principal had been fully disclosed at the time the contract was made When the agent is forced to pay the third party the agent is entitled to be indemnified by the principal The undisclosed principal can require the third party to fulfill the contract unless the undisclosed party was expressly excluded as a party in the written contract the contract is a negotiable instrument signed by the agent with no indication of signing in a representative capacity or the performance of the agent is personal to the contract C If an agent has no authority but nevertheless contracts with a third party the principal cannot be held liable on the contract The agent is liable in this situation a If the principal is disclosed or partially disclosed and the agent contracts with a third party without authorization the agent is liable to the third party without authorization the agent is liable to the third party who relied on the agency status The agent s liability is based on their breach of the implied warranty of authority b If the third party knows at the time the contract is made that the agent does not have authority then the agent is not liable If the agent expressed to the third party uncertainty as to the extent of their authority the agent is not personally liable D An electronic agent eagent is a semiautonomous computer program that is capable of executing specific tasks According to the Uniform Electronic Transactions Act UETA eagents can enter into binding agreements on behalf 0 their principals 6 Liability for Torts and Crimes A Whether a principal can be held liable for an agent s torts and crimes depends on several factors Sometimes a principal may be held liable for not only torts of an agent but also for torts committed by an independent contractor B A principal who acts through an agent may be liable for harm resulting from the principal s own negligence or recklessness C A principal who authorizes an agent to commit a tort may be liable to persons or property injured thereby because the act is considered to be the principal s An agent acting at the principal s direction can be liable along with the principal Chapter 20 Agency D A principal is exposed to tort liability whenever a third person sustains a loss due to the agent s misrepresentation The principal is always directly responsible for an agent s misrepresentation made within the scope of the agent s authority a b When a principal has placed an agent in a position of apparent authority the principal may be liable for the agent s fraudulent acts An agent s innocent misstatements in a contract or warranty transaction can also provide grounds for the third party s rescission of the contract and the award of damages The principal is always directly responsible for an agent s misrepresentation made within the scope of authority E Under the doctrine of respondeat superior a principal may also be liable for harm that his or her agent causes to a third party This doctrine imposes vicarious liability indirect liability on an employer that is similar to strict liability in that both are imposed regardless of fault The employer is liable for torts committed by an employee acting within the course or scope of employment a Employers today are not masters of their employees but control is still a central concept to liability i The rationale for the doctrine of respondeat superior is based on the social duty that requires every person to manage his or her affairs so as not to injure another ii Public policy generally requires that an injured person be afforded effective relief Employers normally carry liability insurance to cover any damages awarded as a result of such lawsuits b Courts may consider certain factors when determining whether a particular act occurred within the course and scope of the agency or employment If a servant took a detour from his master s business the master would be responsible If the servant was on a frolic of his own and no in any way on his master s business the master will not be liable An employee going to and from work or to and from meals usually is considered to be outside the scope of employment unless they job requires travel such as salespersons The employer is charged with knowledge of any dangerous conditions discovered by an employee and pertinent to the employment situation E An employer who knows or should know that an employee has a propensity for committing tortious acts is liable for the employee s acts even if they would not ordinarily be considered within the scope of employment G An employer is not liable for physical harm caused to a third person by the negligent act of an independent contractor in the performance of the contract Chapter 20 Agency H An agent is liable for his or her own crimes A principal or employer is not normally liable for an agent s crime even if the crime was committed within the scope of authority or employment 7 Termination of an Agency A An agency can be terminated by an act of the parties or by operation of law B An agency relationship can be terminated by act of the parties in many ways lapse of time purpose achieved occurrence of a specific event mutual agreement or termination by one party a Wrongful termination can subject the cancelling party to a lawsuit for breach of contract b A special rule applies to an agency coupled with an interest The agent has some legal right to the property that is the subject of the agency 0 When the parties terminate an agency it is the principal s duty to inform any third parties who know the existence of the agency that it has been terminated C Certain events terminate agency authority automatically because their occurrence makes it impossible for the agent to perform or improbable that the principal would continue to want performance death or insanity impossibility changed circumstances bankruptcy and war Chapter 21 Employment Relationships 1 Employment at Will A Employment relationships have traditionally been governed by the common law doctrine of employment at will Under this doctrine either party may terminate the employment relationship at any time and for any reason unless doing so violates an employee s statutory or contractual rights Because of the harsh effects of the employmentatwill doctrine for employees courts have carved out various exceptions to it These exceptions are based on contract theory tort theory and public policy a Some contracts have held that an implied employment contract exists between the employer and the employee If the employee is fired outside the terms of the implied contract he or she may succeed in an action for reach of contract even though no written employment contract exists b The discharge of an employee may give rise to an action for wrongful discharge under tort theories Abusive discharge procedures may result in a lawsuit for intentional in iction of emotional distress or defamation c The most common exception to the employmentatwill doctrine is made on the basis that the employer s reason for firing the employee violates a fundamental public policy of the jurisdiction This may apply to whistleblowers employees who tell government authorities upperlevel managers or media that their employer engaged in illegal or unsafe activities C Whenever an employer discharges an employee in violation of an employment contract or a statutory law protecting employees the employee may bring in an action for wrongful discharge 2 Wages Hours and Layoffs A In the 1930s Congress enacted several laws to regulate the wages and B working hours of employees The Fair Labor Standards Act FLSA prohibits oppressive child labor Children aged fourteen to eighteen are not allowed to work in hazardous occupations There are many restrictions on how many hours per day and per week children fourteen and fifteen can work The FLSA provides that a minimum wage must be paid to employees in covered industries When state minimum wage is greater than the federal minimum wage the employee is entitled to the higher wage Under the FLSA an employee who works more than 40 hours a week must be paid no less than 15 times their regular pays for all hours over 40 Certain employees are exempt from the FLSA s overtime provisions a An executive employee is one whose primary duty is management An employer cannot deny overtime wages based only on an employee s job title and must be able to show that the employee s primary duty qualifies them for an exemption Chapter 21 Employment Relationships b To qualify under the administrative employee exemption the employee must be paid a salary not hourly wages and have a primary duty directly related to management or the employer s general business operations The employee s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance E The laws pertaining to employee layoffs are increasingly the subject of litigation a The Worker Adjustment and Retraining Notification WARN Act applies to employers with at least one hundred fulltime employees and requires that the employer provide sixty days notice before implementing a mass layoff or closing a plan that employs more than 50 filltime workers i Employers can either provide advance notice to the affected workers or their representative They must also notify state and local government authorities so that they can provide resources to displaced workers ii If sued an employer that orders a mass layoff or plant closing in violation of the WARN Act can be fined up to 500 for each day of the violation b Many states also have statutes requiring employers to provide notice before initiating mass layoffs which may have requirements different from and may even be stricter than those in the WARN Act 3 Family and Medical Leave A Congress passed the Family and Medical Leave Act FMLA to allow employees to take time off work for family or medical reasons The FMLA does not supersede any state or local law that provides more generous family or medicalleave protection B The FMLA requires employers that have 50 or more employees to provide an employee with up to 12 weeks of unpaid family or medical leave during any 12month period An eligible employee may take up to 12 weeks of leave within a 12month period for many reasons C When an employee takes FMLA leave the employer must continue the worker s healthcare coverage on the same terms as if the employee had continued to work D An employer that violates the FMLA can be required to provide various remedies such as damages to compensate the employee for lost wages and benefits denied compensation and actual monetary losses job reinstatement or a promotion 4 Worker Health and Safety A Under common law employees who were injured on the job had to file lawsuits against their employers to obtain recovery Many state and federal statues protect employees from risk of accidental injury death or disease resulting from their employment today Chapter 21 Employment Relationships B The Occupational Safety and Health Act impose on employers a general duty to keep the workplace safe on a federal level It has established specific safety standards that employers must follow depending on the industry a The act requires that employers post certain notices in the workplace maintain specific records and submit reports Whenever a work related injury or disease occurs employers must make reports directly to OSHA b OSHA compliance officers may enter and inspect the facilities of any establishment covered in the OSHA Under the act an employer cannot discharge an employee who files a complaint or who in good faith refuses to work in a highrisk area if bodily harm or death might result C State workers compensation laws establish an administrative procedure for compensating workers injured on the job Instead of suing an injured worker files a claim with the state agency or board that administers local workers compensation claims Usually workers compensation statutes allow employers to purchase insurance from a private insurer or a state fund to pay workers compensation benefits in the event of a claim a In general the only requirements to recover benefits under state workers compensation are the existence of an employment relationship and an accidental injury that occurred on the job or in the course of employment regardless of fault An injured employee must notify their employer promptly b If an employee accepts workers compensation benefits they may not sue for injuries caused by the employer s negligence A worker may sue an employer who intentionally injures the worker however 5 Income Security A Federal and state governments that participate in insurance programs designed to protect employees and their families form the financial impact of retirement disability death hospitalization and unemployment B The Social Security Act provides for old age retirement survivors and disability insurance also known as OASDI Both employers and employees must contribute under the Federal Insurance Contributions Act FICA to help pay for benefits that will partially make up for the employees loss of income on retirement Retired workers are eligible to receive monthly payments from the Social Security Administration which administers the Social Security Act C Medicare is a federal government healthinsurance program administered by the Social Security Administration for people 65 years of age and older and for some under 65 who are disabled a Medicare now offers additional coverage options and a prescription drug plan Chapter 21 Employment Relationships b Like Social Security Medicare is funded by contributions from the employer and the employee but there is no cap on the amount of wages subject to the Medicare tax D The Employee Retirement Income Security Act ERISA has provisions governing employers who have private pension funds for their employees to be enforced by the US Department of Labor ERISA created the Pension Benefit Guaranty Corporation PBGC an independent federal agency to provide timely and uninterrupted payment of voluntary private pension benefits ERISA does not require an employer to establish a pension plan but provides standards for its management a A key provision of the ERISA concerns vesting giving an employee a legal right to receive pension benefits at some future date when they stop working b ERISA established rules on how pension funds must be invested in an attempt to prevent mismanagement of those funds E The Federal Unemployment Tax Act FUTA created a stateadministered system that provides unemployment compensation to eligible individuals who have lost their jobs To be eligible for unemployment compensation a worker must be willing and able to work F The Consolidated Omnibus Budget Reconciliation Act COBRA prohibits an employer from eliminating a worker s medical vision or dental insurance on the voluntary or involuntary termination of the worker s employment Only workers fired for gross misconduct are excluded a A worker has 60 days to decide whether to continue with the employer s group insurance plan If the worker chooses to continue coverage the employer is obligated to keep the policy active for up to 18 months b Generally an employer can require the employee to pay all of the premiums plus a 2 percent administrative charge G The Health Insurance Portability and Accountability Act HIPAA also affects employersponsored group health plans HIPAA does not require employers to provide health insurance but does establish requirements for those that do H Under the Affordable Care Act ACA or Obamacare most employers with 50 or more fulltime employees are required to offer healthinsurance benefits Employers will be fined for failing to provide benefits only if one of their employees receives a federal subsidy to buy health insurance through a health insurance exchange 6 Employee Privacy Rights A The greatest privacy concern in employment today involves electronic monitoring of employees activities B More than half of employers engage in some form of electronic monitoring of their employees a Employees of private employers have some privacy protection under tort law and state constitutions Some statutes may limit an employer s Chapter 21 Employment Relationships conduct in certain respects The First Amendment s protection of free speech prevents only government employers from restraining speech by blocking websites b When determining whether an employer should be held liable for violating an employee s privacy rights the courts generally weigh the employer s interests against the employee s reasonable expectation of privacy C Employers engage in many types of employee screening and monitoring Certain practices have been challenged as violations of employee privacy rights a The Employee Polygraph Protection Act generally prohibits employers from requiring employees or job applicants to take liedetector tests or suggesting or requesting that they do so It also restricts employer s ability to use or ask about the results of any liedetector test or to take any negative employment action based on the results b In the interest of public safety and to reduce unnecessary costs many employers require their employees to submit to drug testing i Government public employers are constrained in drug testing by the Fourth Amendment which prohibits unreasonable searches and seizures Courts normally uphold drug testing of certain employees when drug use in a particular job may threaten public safety ii The Fourth Amendment does not apply to drug testing conducted by private employers Many states have statutes that allow drug testing by private employers but put restrictions on when and how the testing may be performed Chapter 22 Employment Discrimination 1 Title VII of the Civil Rights Act of 1964 A E Title VII of the Civil Rights Act of 1964 and its amendments prohibit job discrimination against employees applicants and union members on the basis of race color national origin religion and gender at any stage of employment It prohibits discrimination in the hiring process discipline procedures discharge promotion and benefits The Equal Employment Opportunity Commission EEOC monitors compliance with Title VII An employee alleging discrimination must file a claim with the EEOC before a lawsuit can be brought against the employer If the EEOC decides not to investigate a claim the employee may bring his or her own lawsuit against the employer The United States Supreme Court limited the rights of the employees to bring discrimination claims against their employer as a group class Title VII of the Civil Rights Act of 1964 prohibits both intentional and unintentional discrimination a Intentional discrimination by an employer against an employee is known as disparatetreatment discrimination A prima facie case is one where the plaintiff met the initial burden of proof and will win unless the employer can present a legally acceptable defense b Disparateimpact discrimination occurs when a protected group of people is adversely affected by an employer s practices procedures or tests even though they do not appear to be discriminatory i A plaintiff can prove a disparate impact by comparing the employer s workforce to the pool of qualified individuals available in the local labor market The plaintiff must show that as a result of educational or other job requirements or hiring procedures the percentage of nonwhites women or members of other protected classes in the employer s workforce does not re ect the percentage of that group in the pool of qualified applicants ii A plaintiff can also prove disparateimpact discrimination by comparing the selection rates of whites and nonwhites regardless of the racial balance in the employer s workforce When an educational or other job requirement or hiring procedure excludes members of a protected class from an employer s workforce at a substantially higher rate than for nonmembers discrimination occurs Title VII prohibits employers from discriminating against employees or job applicants on the basis of race color or national origin If an employer s standards or policies for selecting on employees or job applicants in these protected classes then a presumption of illegal discrimination arises a Title VII also protects against reverse discrimination discrimination against majority group individuals such as white males Chapter 22 Employment Discrimination b 42 USC Section 1981 protected the right of freed slaves prohibits discrimination on the basis of race or ethnicity in the formation or enforcement of contracts it can provide an alternative basis for a plaintiff s action and is potentially advantageous because it does not place a cap on damages F Title VII also prohibits government employers private employers and unions from discriminating against persons because of their religion Employers cannot treat their employees more or less favorably based on their religious beliefs or practices and cannot require employees to participate in any religious activity a An employer must reasonably accommodate the religious practices of its employees unless to do so would cause undue hardship to the employer s business b A reasonable attempt to accommodate does not necessarily require the employer to make every change for an employee s benefit An employer is not required to make an accommodation that would cause the employer undue hardship G Under Title VII and other federal acts employers are forbidden from discriminating against employees on the basis of gender Employers are prohibited from classifying or advertising jobs as male or female unless the employer can prove that the gender of the applicant is essential to the job a Generally to succeed in a suit for gender discrimination a plaintiff must demonstrate that gender was a determining factor in the employer s decision to hire fire or promote him or her b The Pregnancy Discrimination Act amended Title VII and expanded the definition based on pregnancy Women affected by pregnancy childbirth or related medical conditions must be treated the same as other persons not so affected by similar in ability to work 0 Several laws prohibit employers from engaging in genderbased wage discrimination The Equal Pay Act requires equal pay for male and female employees working for the same establishment doing similar work H Employees who leave their jobs voluntarily can claim that they were constructively discharged by the employer Constructive discharge occurs when the employer causes the employee s working conditions to be so intolerable that a reasonable person in the employee s position would feel compelled to quit a The employee must present objective proof of intolerable working conditions which the employer knew or had reason to know about yet failed to correct within a reasonable time period b Plaintiffs can use constructive discharge to establish any type of discrimination claims under Title VII including race color national origin religion gender and pregnancy but is most commonly asserted in cases involving sexual harassment Chapter 22 Employment Discrimination I Title VII also protects employees against sexual harassment in the workplace Sexual harassment can be quid pro quo or in a hostile environment Quid pro quo harassment occurs when sexual favors are demanded in return for job opportunities promotions salary increases or other benefits Hostile environment harassment occurs when a pattern of sexually offensive conduct runs throughout the workplace and the employer has not take steps to prevent or discourage it a For an employer to be held liable for a supervisor s sexual harassment the supervisor normally must have taken a tangible employment action against the employee A tangible employment action is a significant change in employment status or benefits such as when an employee is fired refused a promotion demoted or reassigned to a position with significantly different responsibilities b The EllerthFaragher affirmative defense to charges of sexual harassment has two elements the employer must have taken reasonable care to prevent and promptly correct any sexually harassing behavior and the plaintiffemployee must have unreasonably failed to take advantage of preventive or corrective opportunities provided by the employer to avoid harm c Employers sometimes retaliate against employees to complain about sexual harassment or other Title VII violations In a retaliation claim an individual asserts that he or she has suffered harm as a result of making a charge testifying or participating in a Title VII investigation or proceeding d When the harassment of coworkers rather than supervisors creates a hostile working environment an employee may still have a cause of action against the employer Normally the employer will be held liable only if it knew or should have known about the harassment and failed to take immediate remedial action e Title VII protection extends to individuals who are sexually harassed by members of the same gender f Title VII does not prohibit discrimination or harassment based on a person s sexual orientation but a growing number of states have enacted laws that prohibit sexual orientation discrimination in private employment J Employees online activities can create a hostile working environment in many ways Racial jokes ethnic slurs or other comments contained in email texts blogs and social media can lead to a claim of hostileenvironment harassment or other forms of discrimination K Employer liability under Title VII may be extensive If the plaintiff successfully proves that unlawful discrimination occurred he or she may be awarded reinstatement back pay retroactive promotions and damages Compensatory damages are available only in cases of intentional discrimination Chapter 22 Employment Discrimination 2 Discrimination Based on Age A Age discrimination is potentially the most widespread form of discrimination because anyone could be a victim at some point in life The Age Discrimination in Employment Act ADEA prohibits its employment discrimination on the basis of age against individuals 40 years of age or older B The burdenshifting procedure under the ADEA differs from the procedure under Title VII a plaintiff must show that the unlawful discrimination was not just a reason but the reason for adverse employment action To establish a prima facie case the plaintiff must show that she or he was a member of the protected age group was qualified for the position from which she or he was discharged and was discharged because of age discrimination C Generally the states are immune under the 11th Amendment from lawsuits brought by private individuals in federal court unless a state consents to the suit 3 Discrimination Based on Disability A The Americans with Disabilities Act ADA of 1990 prohibits disabilitybased discrimination in all workplaces with 15 or more workers It requires that employers reasonably accommodate the needs of persons with disabilities unless to do so would cause the employer to suffer an undue hardship B To prevail on a claim under the ADA a plaintiff must show that he or she has a disability is otherwise qualified for the employment in question and was excluded form the employment solely because of the disability C The ADA defines a disability as including a physical or mental impairment that substantially limits one or more of the major life activities or the affected individual a record of having such an impairment or being regarded as having such an impairment a The ADA includes a separate provision that prevents employers from taking adverse employment actions based on stereotypes or assumptions about individuals who associate with people how have disabilities b In 2008 Congress amended the ADA to strengthen its protections and prohibit employers from considering mitigating measures or medications when determining if an individual has a disability Disability is now determined on a casebycase basis D The ADA does not require that employers accommodate the needs of job applicants or employees with disabilities who are not otherwise qualified for the work a Employers who do not accommodate the needs of persons with disabilities must demonstrate that the accommodations would cause undue hardship in terms of being significantly difficult or expensive for the employer b Employers must modify their jobapplication and selection process so that those with disabilities can compete for jobs with those who do not have disabilities Chapter 22 Employment Discrimination 0 Drug addiction is considered a disability under the ADA because it does not protect individuals who are actually using illegal drugs however The ADA protects only persons with former drug addictions 0 those who have completed or are now in a supervised drug rehabilitation program People suffering from alcoholism are protected by the ADA d Workers with disabilities must be given equal access to any health insurance provided to other employees An employer can put a limit on healthcare payments under its group health policy as long as the cap is applied equally to all insured employees and does not discriminate on the basis of disability 4 Defenses to Employment Discrimination A The first line of defense for an employer charged with the employment discrimination is to assert that the plaintiff has failed to meet his or her initial burden of proving that discrimination occurred Once a plaintiff succeeds in proving that discrimination occurred the burden shifts to the employer to justify the discriminatory practice There are a few possible justifications An employer may defend against a claim of disparateimpact unintentional discrimination by asserting that a practice that has a discriminatory effect is a business necessity A bona fide occupational qualification defense applies when discrimination against a protected class is essential to a job Race color and national origin can never be BFOQs An employer with a history of discrimination may have no members of protected classes to upperlevel positions If no present intent to discriminate is shown and if promotions or other job benefits are distributed according to a fair seniority system workers with more years of service are promoted first or laid of last the employer normally has a good defense against the suit In some situations employers have attempted to avoid liability for employment discrimination on the basis of afteracquired evidence evidence that the employer discovers after a lawsuit is filed of an employee s misconduct 5 Af rmative Action A Affirmative action programs attempt to make up for past patterns of discrimination by giving members of protected classes preferential treatment in hiring or promotion Title VII neither requires nor prohibits affirmative action Because of their inherently discriminatory nature affirmative action programs may violate the equal protection clause of the 14th Amendment to the US Constitution An affirmative action program normally is constitutional only if it attempts to remedy past discrimination and does not make use of quotas or preferences Chapter 22 Employment Discrimination C Most of the affirmative action cases that have reached the USSC in the last 20 years have involved university admissions programs and schools rather than business employers a Generally the Court has found that a school admissions policy that automatically awards minority group applicants a specified number of points violates the equal protection clause It is unconstitutional for schools to apply a mechanical formula that gives diversity bonuses based on ethnicity or race Chapter 23 Immigration and Labor Law 1 Immigration Law A The most important laws affecting the employment relationship are the Immigration Reform and Control Act IRCA of 1986 and the Immigration Act of 1990 B When the IRCA was enacted in 1986 it provided amnesty to certain groups of aliens living illegally in the US at the same time It also established a system that sanctions employers that hire immigrants who lack work authorization a To comply with IRCA requirements an employer must perform I9 verifications for new hires including those hired as contractors or day workers if they work under the employer s direct supervision i The employer must declare under penalty or perjury that an employee produced documents establishing his or her identity and legal employability ii Most legal actions alleging violations of I9 rules are brought against employees An employee must state on the I9 form that she or he is a US citizen or otherwise authorized to work in the US b US Immigration and Customs Enforcement ICE is the largest investigative arm of the US Department of Homeland Security ICE has a general inspection program that conducts random compliance audits Individuals who believe they have suffered as a result of illegal hiring have no direct cause of action to sue an employer under current law c An employer who violates the law by hiring an unauthorized worker is subject to substantial penalties In determining the penalty ICE considers the seriousness of the violation and the employer s past compliance C The Immigration Act of 1990 placed caps on the number of visas that can be issued to immigrants each year Most temporary visas are set aside for workers who can be characterized as persons of extraordinary ability members of the professions holding advanced degrees or other skilled workers and professionals a A company seeking to hire a noncitizen worker may do so if the worker is selfauthorized is a lawful permanent resident or has a valid temporary Employment Authorization Document A lawful permanent resident can prove his or her status to an employer by presenting an I551 Alien Registration Receipt green card or a properly stamped foreign passport b The most common and controversial visa program today is the H1B visa system To obtain an H1B visa the potential employee must be qualified in a specialty occupation which is defined as involving highly specialized knowledge and the attainment of a bachelor s or higher degree or equivalent Chapter 23 Immigration and Labor Law c Before submitting an H1B application an employer must file a Labor Certification application on a form known as ETA 9035 d Other specialty temporary visas are available for other categories of employees D Until 2010 immigration and the treatment of illegal immigrants were governed exclusively by federal laws a The federal government insisted that federal immigration laws preempt state legislation b The USSC s decision does not prohibit states from enacting laws related to immigration but it does set some limits States are prohibited from making it a crime for immigrants not to carry their registration documents or for those without work permits to seek employment 2 Federal Labor Laws A Federal labor laws governing unionemployer relations have developed B considerably since the first law was enacted in 1932 The NorrisLaGuardia Act restricted the power of federal courts to issue injunctions against unions engaged in peaceful strikes This act declared a national policy permitting employees to organized One of the foremost statutes regulating labor is the National Labor Relations Act NLRA of 1935 which established the rights of employees to engage in collective bargaining to strike The act specifically defined a number of employer practices as unfair to labor a The NLRA created the National Labor Relations Board NLRB to oversee union elections and to prevent employers from engaging in unfair and illegal union activities and unfair labor practices When violations are found the NLRB may issue a ceaseanddesist order compelling the employer to stop engaging in the unfair practices b Under the NLRA employers and unions have a duty to bargain in good faith Bargaining over certain subjects is mandatory and a party s refusal to bargain over these subjects is an unfair labor practice that can be reported to the NLRB c To be protected under the NLRA an individual must be an employee or a job applicant The LaborManagement Relations Act LMRA or TaftHartley Act of 1947 was passed to proscribe certain unfair union practices such as the closed shop A closed shop is a firm that requires union membership as a condition of employment A union shop is a firm that does not require union membership as a prerequisite for employment but can and usually does require that workers join the union after a specified amount of time on the job The act allowed individual states to pass their own righttowork laws laws making it illegal for union membership to be required for continued employment in any establishment Chapter 23 Immigration and Labor Law E The LaborManagement Reporting and Disclosure Act LMRDA established an employee bill of rights and reporting requirements for union activities The act regulates unions internal business procedures including elections The act also outlawed hotcargo agreements in which employers voluntarily agree with unions not to handle use or deal in goods of other employers produced by nonunion employees F Coverage of federal labor laws is broad and extends to all employers whose business activity either involves or affects interstate commerce Some workers are specifically excluded from these laws When a union or employee believes that an employer has violated federal labor law a charge is filed with a regional office of the NLRB 3 Union Organization A The key starting point for labor relations law is the decision by a company s employees to form a union which is usually referred to as their bargaining representative B Typically the first step in organizing a union at a particular firm is to have the workers sign authorization cards An authorization card usually states that the worker desires to have a certain union represented in the workforce If a majority of the workers sign authorization cards the union organizers present the cards to the employer and ask for formal recognition of the union even though it is not necessary C If the employer refuses to voluntarily recognize the union after a majority of the workers sign authorization cards the union organizers present the cards to the NLRB with a petition for an election D Many disputes between labor and management arise during union election campaigns Generally the employer has control over unionizing activities that take place on company property and during working hours An employer may campaign among its workers against the union but the NLRB carefully monitors and regulates the tactics used by management 4 Collective Bargaining A If the NLRB certifies the union the union becomes the exclusive bargaining representative of the workers The central legal right of a union is to engage in collective bargaining on the members behalf Collective bargaining is the process by which labor and management negotiate the terms and conditions of employment B Wages hours of work and certain other conditions of employment may be discussed during collective bargaining sessions Management need not bargain over a decision to shut down certain facilities but it must bargain over the economic consequences of this decision C Bargaining does not mean that one side must give to the other or that compromises must be made it means that a demand must be taken seriously and considered as part of a package to be negotiated Both the employer and the union must bargain with good fait make reasonable effort to come to an agreement If an employer or union refuses to bargain in good faith without Chapter 23 Immigration and Labor Law justification it has committed an unfair labor practice and the other party may petition the NLRB for an order requiring good faith bargaining 5 Strikes and Lockouts A Even when labor and management have bargained in good faith they may be unable to reach a final agreement When extensive collective bargaining has been conducted an impasse results the union may calla strike against the employer to pressure it into making concessions In a strike the unionized employees leave their jobs and refuse to work Striking workers lose their rights to be paid and management loses production and may lose customers when orders cannot be filled The right to strike is guaranteed by the NLRA within limits Strike activities such as picketing are protected by the free speech guarantee of the First Amendment to the US Constitution Persons who are not employees have a right to participate in picketing an employer Employers are permitted to hire replacement workers to substitute for the striking workers The conduct of strikers may cause the strikes to be illegal violent strikes massed picketing sitdown strikes nostrike clause secondary boycotts and wildcat strikes An important issue concerns the rights of strikers after a strike ends Striking workers are not guaranteed the right to return to their jobs after the strike if satisfactory replacement workers have been found If the employer has not hired replacement workers to fill the strikers positions then the employer must rehire economic strikers to fill any vacancies Lockouts are the employer s counterpart to the workers right to strike A lockout occurs when the employer shuts down to prevent employees from working Lockouts are usually used when the employer believes that a strike is imminent A lockout may be a legal employer response when a union and an employer have reached a stalemate in collective bargaining However an employer may not use a lockout as a tool to break the union and pressure employees into decertification Unfair Labor Practices A B Many unfair labor practices may occur within the normal working relationship as well Once a union has been certified an employer must recognize and bargain in good faith with the union Failure to do so is an unfair labor practice Certification of the union as the bargaining unit s representative binds all of the employees in that bargaining unit so the union must fairly represent all the members of the bargaining unit The NLRA declares it to be an unfair labor practice for an employer to interfere with restrain or coerce employees in the exercise of their rights to form a union and bargain collectively If an employer has unlawfully interfered with the operation of a union the NLRB or a reviewing court may issue a ceaseanddesist order halting the practice Chapter 23 Immigration and Labor Law D The NLRA outlawed company unions and any other form of employer domination of workers unions Under the law against employer domination an employer can have no say in which employees belong to the union or which employees belong to the union or which employees serve as union officers Company actions that support a union may be considered improper potential domination E The NLRA prohibits employers from discriminating against workers because they are union officers or otherwise associated with a union When workers must be laid off the company cannot consider union participation as a criterion of deciding whom to fire F Certain union activities are declared to be unfair labor practices by the Labor Management Relations Act a A significant unfair labor practice by a union is coercion or restraint on an employee s decision to participate in or refrain from participating in union activities The NLRA provides unions with the authority to regulate their own internal affairs which includes disciplining union members The discipline cannot be used in an improperly coercive fashion b A union may not discriminate against workers because they refuse to join The LaborManagement Relations Act also prohibits the union from using its in uence to cause an employer to discriminate against workers who refuse to join the union c Other unfair labor practices by unions include demanding the hiring of unnecessary workers participating in picketing to coerce unionization without majority employee support and refusing to engage in good faith bargaining with employer representatives
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