Employment Relations Issues

Chapter 4

TERMS

• • • • • • • • • • • • Actual Authority Apparent Authority Termination for just cause Breach of Contract Canons of Interpretation of Contract Law Formation of a Contract Contract Compensatory damages Mitigation of damages Liquidated damages and penalty provision Rescission Restitution Promissory estoppel Re-assignment clause Termination without cause Restrictive covenant/Covenant not to compete Employment at will Tor theories and Employment

Management Contexts, Relevant Laws, and Cases

Basic Principles of How Interpret Contract

• Are called: Canons of interpretation: • 1. As an integrated whole- in a way that makes sense as a whole.

Courts read sections to see if cohesion through the document.

They read the clauses of the document to see if they are tied in.

The document should reflect agreement in all its parts.

2. The courts interpret a contract most strictly against the party that drafted the document in the event of ambiguity.

• Perspective: when you negotiate or draft a document use the worst case scenario.

Fundamental Aspects of a Contract

A contract is a promise, or set of promises. There are (4) aspect of a • • • • contract: Agreement-offer and acceptance Consideration-exchange of value Capacity-legal competence of parties to enter a contractual agreement.

Legality-to be enforceable, it must not violate laws.

Oral vs. Written Contracts

 Good managerial practice: Put every contract in writing.

 Under certain circumstances, courts will not enforce oral contracts.

 Statutes of Frauds—states require some types of contracts to be in writing.

1.

agreement for sale of land 2. Contract for sale of goods ($500 or more) 3. Contracts that cannot be performed within one year of contract.

• • • • •

Contract Damages for Breach of Contract:

the courts doesn’t punish the party that breach but try to compensate the innocent party to the promise of the contract.

• Punitive damages-compensation in excess Compensatory damages-direct loss Specific performance-fulfill terms of contract p. 54 Liquidated damages provision have an approximate damages p.68

• • • Rescission-undoing the contract, p.55

Restitution-returning the goods or property, p.56

Promissory estoppel-need (3) elements p.56 (78) Penalty provision-must be reasonable • 1. an expected promise induce reliance Courts will not uphold penalty provision in a contract.

• • 2. Reliance on that promise 3. detriment occurs when promise doesn’t occurs

BARGINING POWER

Disparity of Bargaining Power

• A contract is written exclusively by one party; the other party is forced to accept terms.

• No bargaining.

• Example: National Letter of Intent between an institution and a student-athlete (who cannot negotiate content).

• Refer to page 56-57

Authority to Contract • Actual authority – In agency law, the principal conveys to the agent what his or limits of authority may be.

• Apparent authority – An instance when the principal has somehow conveyed to a third party that the agent has authority to act although he or she does not have actual authority.

• Focus Case- p.58

Competitive Advantage Strategies Contract Law

 Use the worst case scenario when developing contracts.   Make sure contracts serve the interests of your organization.

 Put all contracts in writing.

 Avoid making promises that go beyond what the written agreement conveys.

 Enforce the limits of actual authority.

Employee Contract Provisions • • • • • • Duties and responsibilities Reassignment Clause- (Focus Case p.60) Compensation (Focus Case p. 62) Terms of employment Clauses related to termination Restrictive covenant/covenant not to compete- restrict persons from working with competitor. (p.69) • Miscellaneous provisions

• Termination for just cause: Clauses Related to Termination • • Morals clause: (p. 64) Behavior that has an adverse effect on an individual or organization’s image • Termination without cause: • Wrongful termination- someone has been fired contrary to terms of contract.

Competitive Advantage Strategies Employment Contracts

• Develop contracts with care and cover all necessary provisions.

• Give particular attention to termination clauses and liquidated damages provisions.

• • Delineate prohibited behavior and make sure it’s understood.

Specify whether an employee can be reassigned to another position within the organization.

Employment at Will

 Employer may fire an employee at any time, for any reason (or for no reason).

 Employee can quit at any time, for any reason.

 In practice, the rule favors employers more than employees.

 Refer to page (71) Frazier v. University of the District of Columbia

Exceptions to Employment at Will



Based on contract law:

 Implied contracts  Covenant of good faith and fair dealing 

Based on public policy:

 Employment discrimination  Whistleblowing (p. 73)  Cooperation in an investigation against the company  Submission of unfair labor practice charges  Complaints about safety hazards/violations

HEAD COACHES

TORT THEORIES AND EMPLOYMENT • Defamation- tort that protects one’s reputation Tort Theories and Employment • Qualified privilege-in good faith employers can disclose information of employee’s work performance.

• Negligent misrepresentation- information resulting in harm • Fraud-induce action by another that leads to harm • Tortious interference with contractual relations- prohibit improper interference with existing contracts.

Competitive Advantage Strategies Tort Theories and Employment

• When giving employment references, stick to the facts contained in employees’ files.

• Give a balanced reference when disclosing information about an employee—provide both strengths and weaknesses.

• Do not try to convince a recruit to breach an existing employment contract.

1. Whenever you begin to draft a contract or start a negotiation, you should take the perspective of which of the following?

• a. The integrated whole b. The worst case scenario c. The best case scenario d. Enhancing ambiguity 2. The formation of a contract has which of these four fundamental aspects?

a. Offer, consideration, capacity, and authority b. Acceptance, capacity, authority, and integration c. Offer, rescission, authority, and capacity d. Agreement, consideration, capacity, and legality • 3. In a coaching contract, a coach may often be compensated beyond base salary with additional benefits. This added compensation is known as __________.

a. Perquisites (perks) b. Liquidated damages c. Just cause compensation 4. Which of the following is the practice in which employment has no specified duration and the employer may fire the employee at any time, for any reason or for no reason?

• a. An illegal employment practice b. Employment at will c. Inequitable employment d. Employment ambiguity 5. Many states have passed __________ providing that employees who report illegal activities allegedly committed by their employer shall not be subject to discrimination or retaliation by the employer. • a. Good faith and fair dealing statutes b. Non-reassignment statutes c. Restrictive covenant statutes d. Whistleblower statutes 6. Which of the following prohibits improper interference with existing contracts? a.

b.

c.

Tortious interference with contractual relations Misrepresentation Contractual freedom • Chapter Questions

1. Whenever you begin to draft a contract or start a negotiation, you should take the perspective of which of the following?

• a. The integrated whole b. The worst case scenario c. The best case scenario d. Enhancing ambiguity B 2. The formation of a contract has which of these four fundamental aspects?

a. Offer, consideration, capacity, and authority b. Acceptance, capacity, authority, and integration c. Offer, rescission, authority, and capacity d. Agreement, consideration, capacity, and legality D • 3. In a coaching contract, a coach may often be compensated beyond base salary with additional benefits. This added compensation is known as __________.

a. Perquisites (perks) b. Liquidated damages c. Just cause compensation A 4. Which of the following is the practice in which employment has no specified duration and the employer may fire the employee at any time, for any reason or for no reason?

• a. An illegal employment practice b. Employment at will c. Inequitable employment d. Employment ambiguity B 5. Many states have passed __________ providing that employees who report illegal activities allegedly committed by their employer shall not be subject to discrimination or retaliation by the employer. • a. Good faith and fair dealing statutes b. Non-reassignment statutes c. Restrictive covenant statutes d. Whistleblower statutes D 6. Which of the following prohibits improper interference with existing contracts? a.

b.

c.

Tortious interference with contractual relations Misrepresentation Contractual freedom A

SUMMARY

• • • 1. Review all terms 2. Review Matching Questions 3. Review the topic of the (5) cases done in class and it’s meaning.