Legal Environment of Business
Legal Environment of Business BLAW 3400
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This 6 page Class Notes was uploaded by Marianne Moore on Wednesday September 23, 2015. The Class Notes belongs to BLAW 3400 at Middle Tennessee State University taught by Lara Daniel in Fall. Since its upload, it has received 20 views. For similar materials see /class/213016/blaw-3400-middle-tennessee-state-university in Business Law at Middle Tennessee State University.
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Date Created: 09/23/15
BLAW Final 1 Chapters 21 amp 22 Employment 1 Employment at will Under common law an employee may be fired at any time for any reason and without warning and may quit at any time for any reason without warning unless a contract is in place that states otherwise Exceptions include discrimination on the basis of race color religion sex or national origin violation ofimplied contract violation of covenant of good faith abusive discharge procedures defamation intentional in iction of emotional distress whistleblowing fired for reasons that violate public policyMontana is the only non employmentatwill state Sexual orientation is viewed as quotchoicequot rather than out of one s control so it is not a federally protected class 2 Application ofworker s comp is based on state statutes not federal law nor common law It must be proved an accident occurred on the job AND through the course of employment regardless of fault In some states it is quotorquot rather than quotandquot 3 US Antidiscrimination laws apply to any firm operating inside the US and even to those US firms not operating in the US US law automatically applies unless it is in direct violation of other country s law 4 MUST FILEALL OF THESE THROUGH EEOC BEFORE FILING AN ACTION IN COURT EEOC CAN FILE SUIT ON BEHALF OF VICTIM REGARDLESS OFARBITRATIONAGREEMENT Civil Rights Act VII 1964 Race sex color religion national origin sex means gender not sexual orientation Americans with Disabilities Act Any individual who has disability or major impairment of life activity Applies to companies with 15 workers ADA require employers to quotreasonably accommodate the needs ofpersons with disabilities unless to do so would create an quotundue hardship for the employer Plaintiff must show heshe 1 has a disability 2 is otherwise qualified for employment in question and 3 was excluded solely because of disability Age Discrimination in Employment Act ADEA 1967 Protected class of 40 and older relatively older worker Applies to companies with 20 employees activities must affect interstate commerce Burden is on employee to establish butfor causation as opposed to burden on employer in Title VII To establish Prima Facie case under ADEA the plaintiff must show 1 heshe was member ofprotected age group 2 was otherwise qualified for position from which heshe was discharged 3 was discharged BECAUSE of age discriminationStates have 11th amendment immunity from ADEA lawsuits filed by private parties 5 Disparate Treatment Discrimination on its face It is inherently discriminatory Example because someone is a woman Would argue business necessity BFOQ looked at more narrowly Disparate Impact The results of the action are considered discriminatory Example someone must be over 5 2 and 120 lbs to apply for this job Would also argue business necessity For bonafide occupational qualification BFOQ one must prove definable group or class of employees would be unable to perform the job safely and efficiently Race is NEVER a BFOQ 6 Disparate treatment case process burden is on the employer Prima Facie case plaintiff has met initial burden of proof and will win unless employer can present a legally acceptable defense Step 1 Establish a Prima Facie case Belong to a racial minority Apply and be qualified for the job in which the employer was seeking applications Be rejected for the job in question despite being qualified After being rejected the position must remain open and the company has to continue to seek applicants from person s of the complainant s qualifications BLAW Final 2 Step 2 The Company must articulate that a legitimate nondiscriminatory reason exists for the rejection of the challenger Step 3 The challenger must prove that the organization39s reason for their rejection is a pretext not the true reason for discrimination and discriminatory intent actually motivated employer s decision 7 Quid pro guo harassment when sexual favors are exchanged for promotions job opportunities salary increases other benefits Hostileenvironment harassment when the workplace is permeated with discriminatory intimidation ridicule and insult that is sufficiently severe or pervasive to alter the conditions of the victim s employment and create an abusive work environment If employee signed an arbitration clause you must arbitrate the claim rather than take it to court Employer may be liable if quottangible employment action is taken against victim quid pro EllerthFaragher affirmative defense two elements 1 Employer must have taken reasonable care to prevent and promptly correct any sexually harassing behavior by establishing effective harassment policies and complaint procedures for example 2 The plaintiffemployee must have unreasonably failed to take advantage of preventive or corrective opportunities provided by the employer to avoid harm An employer that can prove both elements will not be liable for a supervisor s harassment Hostile environment harassment employer may be held liable by even harassment by nonemployees if they knew about it and failed to take corrective action Federal law Title VII does not prohibit discrimination on sexual orientation but some state laws do and some company policies also include it Employers can avoid liability for online harassment by taking immediate remedial action Chapter 29 Investor Protection 11933 Securities Act governs initial sales of stocks by businesses Designed to prohibit fraud and stabilize securities Basically formed to require disclosure Eg if you sell an unregistered security that should have been registered you may give it back and it be reimbursed ifyou register but there are factual errors you could be in trouble with this act Must be no material misrepresentations to be valid 1934 Securities Exchange Act applies to secondary trading second and subsequent sales in companies with assets 10 million and 500 shareholders May fall under this act even ifnot originally covered by 1933 act Authorizes SEC to engage in market surveillance SEC Rule 10b5 prohibits the commission of fraud in connection with the purchase or sale of any security prevent insider trading SarbanesOxley Act Attempts to increase corporate accountability by imposing strict disclosure requirements and harsh penalties for violations of securities laws Requires CEOs to take personal responsibilities for statements and reports filed with SEC 2 Investment Contract Any transaction in which a person 1 invests 2 in a common interprise 3 reasonably expecting profits 4 derived primarily or substantially from others managerial or entrepreneurial efforts Known as the Howey test this determines what types of contracts can be considered securities 3 Securities exempt from 1933 Security Act gov39t issued securities bankfinancial institution securities regulated by banking authorities shortterm notes and drafts securities ofnonprofit educational and charitable organizations securities issued by common carriers railroadstrucking companies insurance endowment or annuity contract issued by a state regulated insurance company securities issued in corporate reorganization in which one security BLAW Final 3 is exchanged for another or in bankruptcy proceeding securities issued in stock dividends and stock splits 4 Insider Officers directors and large stockholders 10 of section 12 corporations Section 16b strict liability test bright line test no gray area Deals with 2 transactions buy and sell You either fall in the scope of the act and have to give back to corporation or you don t Within 6 month period of time any profit you make can be recaptured by the corporation No reason necessary motivation doesn t matter Scienter 2 state ofmind State of mind doesn t matter If you are not trading in company you have a relationship with you have no fiduciary duty Rule 10b5 rule passed pursuant to 16b It is not limited to people normally thought of as insiders Involves one transaction Breach of fiduciary duty 5 Outsiders those who trade on information acquired indirectly 1934 10B5 Tippertippee theory information obtained through violation of tipper s fiduciary duty to the corporation Tippee liable if 1 breach of duty to not disclose the info 2 disclosure is made in exchange for something 3 tippee knows or should know ofbreach and benefits from it Misappropriation theory individual wrongfully obtains inside info and trades on it for hisher personal benefit because individual essentially stole info rightfully belonging to another Chapters 12 amp 13 Torts 1Purposes of tort law to compensate those who have suffered a loss or injury due to another person s wrongful act To obtain monetary damages or other relief for the harm suffered Provide remedies for the invasion of various protected interests personal physical safety protecting property certain tangible interests such as reputation 2 Negligence Plaintiff must prove each of the following criteria 1 Duty 2 Breach 3 Causation 4 Damages Mostly based on duty of care people are free to act as they please so long as their actions do not infringe upon interests of others Failure to live up to a standard of care may be an act or an omission Strict liability negligence without fault Intent does not matter fault does not matter 3 Four elements ofnegligence 1 Duty the defendant owed a duty of care to the plaintiff 2 Breach that the defendant breached that duty 3 Causation that the defendant s breach caused the plaintiffinjury 4 Damages that the plaintiff suffered a legally recognizable injury 4 Negligence Defense assumption of risk by participating in event superseding cause some things caused by action not liable for other injuries not incurred by action contributory and comparative negligence contributory recently replaced by comparative used to be no damages received when both parties were negligent now it is computed and distributed accordingly Strict Liability Defenses To say the plaintiff has not met the elements sometimes voluntary assumption of risk product misuse comparative negligence who s most at fault commonly known dangers knives lighters knowledgeable user particular danger isshould be commonly known 5 Strict Product Liability and Public Policv public policy rests on assumption that 1 consumers should be protected against unsafe products 2 manufacturers and distributors should not escape liability for faulty products simply because they are not in privity of contract with the ultimate user of those products and 3 manufacturers sellers and lessors ofproducts are in a better position to bear the costs associated with injuries caused by their products costs they will ultimately pass on to users in higher prices 6 SiX requirements for strict liability BLAW Final 4 1 The product must be in a defective condition when the defendant sells it 2 The defendant normally must be engaged in the business ofselling or otherwise distributing that product 3 The product must be unreasonably dangerous to the use or consumer because of its defective condition in most states 4 The plaintiff must incur physical harm to self of property by use or consumption of the product 5 The defective condition must be the proximate cause of the injury or damage 6 The goods must not have been substantially changed from the time the product was sold to the time the injury was sustained Race ip sa thing speaks for itself Respondeat Superior scope of employment 1 doing their job 2 occur timespace of employment 3 motivated by some desire to advance employer expectations 4 force intentionally used not all elements have to be met to have occurred in scope of employment Chapter 20 1 Types of agency relationship Employeremployee employees who deal with 3ml parties salesperson act on behalf of principal EmployerIndependent Contractor by definition those who hire them have no control over the details of their work so they are not quotemployeesquot may or may not involved an agency relationship Distinction important because it can determine the rights and liabilities of the parties Eg employers required to pay certain taxes for employees but not for ind Contractors 2 Fiduciary Duty duty created by person s undertaking to act primarily for another s benefit in matters connected with the undertaking Relationship involved quottrust and confidencequot 3 Express authority authority declared in clear direct and definite terms given orally or in writing Implied authority to do what is reasonably necessary to carry out express authority and accomplish the objectives of the agency Apparent authority when the principal by either word or action causes a third party reasonably to believe that the agent has authority to act even though there is not express or implied authority 4 Respondeat Superior quotlet the master answer A commonlaw doctrine that makes an employer liable for the actions of an employee when the actions take place within the scope of employment 1 doing their job 2 occur timespace of employment 3 motivated by some desire to advance employer expectations 4 force intentionally used not all elements have to be met to have occurred in scope of employment It imposes vicarious liability on the employer 5 Acting within scope of employment performing work assigned by employer or engaging in course of conduct subject to employer s control Not in scope occurs in independent course of conduct not intended by employer 6 Vicarious liability indirect liability liability without regard to the personal fault of the employer for torts committed by an employee in the scope of employment Liability for what employer knewshould have known actual faultbreach of duty on employer Chapter 24 Consumer Protection 1 Federal Trade Commission Unfair methods of competition unfair and deceptive acts and practices 2 Deceptive advertising ifa reasonable consumer would be misled by the advertising claim Puffery permitted vague generalities and obvious exaggerations BLAW Final 5 Unfair likely to cause substantial consumer injury that consumers could not reasonably avoid and that is not outweighed by the benefit to consumers or competition 3 Three t to determine decentive39 1 All ads both online and of ine must be truthful and not misleading 2 The claims made in an ad must be substantiated that is advertisers must have evidence to back up their claims 3 Ads cannot be unfair which the FTC defines as quotlikely to cause substantial consumer injury that consumers could not reasonably avoid and that is not outweighed by the benefit to consumers or competition 4 Deceptive ads a material representation express or implied that is likely to mislead a reasonable consumer Puffe1 y vague subjective opinion representation relative to specific instance standards for descriptive words may vary Eg quotbestquot quotexcellentquot quotbeautifulquot quotluxuriousquot 5 Actions against deceptive advertising Consent order cease and desist order telling you to stop doing something multiple product order cease and desist on all brand s products not just specific one counter advertising also called corrective 6 Postal reorganization act If you receive unsolicited merchandise sent by US Mail you can dispose ofit or keep it in any way you want without and obligation to the sender Truth in lending act requires sellers and lenders to disclose credit terms or loan terms so consumer can shop around for best financing arrangements Disclosure law Fair credit reporting act Requires that lenders and other creditors report correct relevant and uptodate information consumers may request information used by credit agencies Fair debt collection practices act Purpose was to curb perceived abuses by collection agencies Applies only to specialized debtcollection agencies and attorneys who regularly attempt to collect debts on behalf of someone else usually for a of the amount owed Chapters 27 amp 28 Antitrust 1 Federal Trade Commission Act Unfair methods of competitionfalse and deceptive advertising Sherman Act Restraints of TradeMonopolization Clayton Act Mergers 2 Monopoly Power Control of specific market by a single entity Company need not concern itself with competitors prices because it has a majority of sales maintained by barriers to entry Monopolization Two elements 1 possession ofmonopoly power in the relevant market and 2 the willful acquisition of maintenance of the power as distinguished from growthdevelopment as a consequence ofa superior product business acumen or historic accident concerned with domination to the exclusion of others how you got it and what you do with it 3 Section 1 of the Sherman Act requires two or more persons cannot contract or conspire alone and concerned with finding an agreement that leads to a restraint of trade Per Se rule Courts are precluded from inquiring whether the agreement should be upheld on the ground that it provides benefits that outweigh its anticomp etitive effects Rule of Reason Courts weigh the anticompetitive effects against the precompetitive affects to determine whether the agreement in fact constitutes a reasonable restraint of trade 4 Horizontal restraint any agreement that in some way restrains competition between rival firms competing in the same market Vertical restraint results from an agreement between firms at different levels in the manufacturing and distribution process Encompass entire chain of production 5 Four types ofhorizontal restraints 1 Price Fixing eliminating price competition in which firms seek to sell more by charging less than their rivals firms restrict output per se BLAW Final 6 2 Group Boycotts agreement by two or more sellers to refuse to deal with a particular person or firm per se 3 Horizontal Market Divisions agreements to divide up the market among rival firms per se 4 Trade Associations engage in various joint activities setting standards addressing congress exchanging information rule of reason 6 Vertical merger A company at one stage of production acquires a company at a higher or lower stage ofproduction Horizontal Merger Between firms that compete with each other in the same market Conglomerate Merger Between firms that do not compete with each other because they are in different markets geographically OR product wise
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