Transcript Business Law for the Entrepreneur and Manager

Business Law for the Entrepreneur
and Manager
Chapter 6 – Agency and Employment Law
Frank Cavico and Bahaudin G. Mujtaba
© Cavico & Mujtaba, 2008
Chapter Topics
• Agency Law
• Agency Law In The United States
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Definition of Key Terms
Creation of the Agency Relationship
Duties of the Principal and Agent
Termination of the Agent’s Authority
• Employment Law
• The Employment At-Will Doctrine in the
United States
– Summary
© Cavico & Mujtaba, 2008
Agency Law
• The essence of agency law is to accomplish legally binding
results by utilizing the services of others. The term
“agency,” however, is a very broad one, which concerns
the rights and liabilities created in one person by the acts of
another
• Agency law encompasses three fundamental and distinct
legal fields:
1) contract rights and liabilities of third persons created by
parties who use agents and employees
2) Tort liability of persons for the wrongful acts of their
agents and employees
3) Contract and tort duties which the parties to an agency
relationship owe to one another
© Cavico & Mujtaba, 2008
Agency Law in the United States
Definition of Key Terms
• There are three critical and foundational classifications
made in agency law:
1) The employer-employee relationship, called “master and servant”
in the old English common law. An employee is a person who is
employed to render services of any type and who remains under
the control of another in performing these services
2) The principal-agent relationship. An “agent” is a person who works
for another, called the “principal,” but who also acts for and in the
place of the principal in order to effectuate legal relations with
third parties
3) The employer-independent contractor relationship. an independent
contractor is a person who renders services in the course of an
independent occupation. The independent contractor contracts with
the employer only as to results, not how the work is to be done
© Cavico & Mujtaba, 2008
Creation of the Agency Relationship
• The agency relationship can be created in four ways:
1) agreement of the parties;
2) ratification
3) estopple
4) operation of the law
• A manifestation of mutual agreement by the parties is required; that is,
the principal indicates that he or she consents to having the agent act in
his or her behalf
• Ratification occurs when a person who is not an agent or an agent who
exceeds his or her authority makes a contract for a purported
“principal”
• An agency by estoppel arises when a “principal” either intentionally
or carelessly creates an appearance of an agency relationship
• Finally, the agency relationship can take place by operation of the law.
The law will impose an agency relationship even in the absence of a
formal agreement
© Cavico & Mujtaba, 2008
Duties of the Principal and Agent
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This area of agency law can be logically divided into two
categories:
the principal’s duties to the agent. The principal owes three basic
duties to the agent:
A) compensation,
B) reimbursement
C) cooperation
2) the agent’s duties to the principal. The agent owes four basic duties
to the principal:
A) Obedience,
B) Due care,
C) Accounting
D) Fiduciary duty
1)
© Cavico & Mujtaba, 2008
Termination of the Agent’s Authority
•
Agency relationships come to an end, thereby terminating the agent’s
authority, in two main ways:
1) Termination by the acts of the parties themselves; an agency relationship can
be terminated by the acts of the parties in any one of five ways
A) lapse of time
B) accomplishment of the purposes of the agency
C) occurrence of a condition
D) mutual agreement
E) by the act of only one party
2) Termination automatically by operation of the law:
A) If either the principal or agent dies or goes insane, there is automatic
termination of the agency relationship.
B) The loss or destruction of the subject matter of the agency may result in
the relationship’s termination. If the destruction or loss is total, the
agent’s authority is terminated; but if the loss is partial, the rule is that
the agency relationship is terminated if further actions by the agent will
not be in the best interests of the principal.
C) A change in circumstances affecting the value of the subject matter of
the agency may result in its termination.
D) Bankruptcy of the parties may result in a termination by operation of the
law.
E) A change in the law, which makes the subject matter or the performance
of the agency illegal, renders the agency terminated.
© Cavico & Mujtaba, 2008
Liability of the Parties
• The major categories of agency liability are 1) the liability of the
principal to third parties, and 2) the liability of the agent
• It is a fundamental rule of agency law that a principal is only legally
responsible when his or her agent is authorized to act for the principal
• There are two general sources of agent authority – actual authority and
apparent authority
• The critical distinction between the two types of authority is that
“actual” is based on an expression of authority made by the principal
directly to the agent; whereas “apparent” authority is premised on the
“principal’s” expression of authority to third parties
• Ratification in essence is the affirming by the principal of a prior act
supposedly done on the principal’s behalf, but which was not
authorized
• One very important consequence of the principal-agent relationship is
the notion of “imputed knowledge and notice”
© Cavico & Mujtaba, 2008
• There are three major problem areas when
attempting to ascertain the liability of the agent
when the agent acts for:
1) non-existent principals
2) undisclosed principals
3) partially disclosed principals
• Typically, the agent will sign the contract in his
or her own name, but also will indicate that he
or she is signing as an agent. There are three
concise rules that govern this situation. First, the
agent is still personally liable on the contract.
Second, the principal is liable. Third, the
principal is entitled to all the rights and benefits
of the contract, but with the same limitations as
the undisclosed principal scenario
© Cavico & Mujtaba, 2008
Tort Liability for the Acts of Others
• The governing rule, which goes back to Roman times, is called the
doctrine of “respondeat superior,” which in essence means “let the master
answer” for the wrongs of his or her servant
• The nature of the employer’s vicarious liability is “strict”; that is, the
employer is responsible even though the employer has exercised due care
in the hiring and the supervising of the employee
• In order for the doctrines of respondeat superior and vicarious liability to
apply, two essential elements must be established: first, was there a
master-servant relationship, as opposed to a principal-agent or employerindependent contractor one? And, did the employee commit the wrongful
act within the course or scope of his or her employment?
• The doctrine of respondeat superior generally is a rule imposing civil
liability; and thus is not applicable to the criminal law
© Cavico & Mujtaba, 2008
United States Civil Rights Laws
The Equal Pay Act of 1963
• The purpose of the Equal Pay Act is to prohibit employers
from discriminating on the basis of sex in the payment of
wages for equal work performed
• “Equal work” means jobs of a similar nature, such as a
seamstress and a tailor, requiring equal skill, effort, and
responsibility when performed under similar working
conditions
• Wage differentials also are allowed if based on seniority or
merit systems, quantity and/or quality of production
systems, as well as any other proper non-gender factor
© Cavico & Mujtaba, 2008
Title VII of the Civil Rights Act of 1964
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The Civil Rights Act of 1964 is the most important civil rights act in the
United States. It is very broad in scope and forbids discrimination in not only
employment (covering not only employers but also labor unions), and also in
education opportunity (both public and private) and public accommodations
The Civil Rights Act prohibits discrimination by employers, labor
organizations, and employment agencies on the basis of race, color, religion,
sex, or national origin
An employer subject to the Act is one who has 15 or more employees for each
working day in each of 20 or more calendar weeks in the current or preceding
calendar year. Specific employment practices that are prohibited by the Act
include the employer’s: 1) failure or refusal to hire, to discharge, or to
discriminate against a person because of his or her race or other protected
characteristics; 2) the limitation, segregation, or classification of employees or
applicants for improper reasons; 3) the maintenance of segregated work teams;
4) the granting of better bonuses and benefits based on race or other improper
classifications; and 5) allowing racial, sexual, or national origin insults, abuse,
hostility, or an offensive environment in the workplace
© Cavico & Mujtaba, 2008
• Discrimination can be direct and overt or indirect and inferential
• Employers not only cannot discriminate in employment practices on the
basis of religion, but also must make a reasonable accommodation to the
religious needs of their employees but only if such accommodation
would not result in an undue hardship or burden to the employer
• Title VII prohibits the treatment of an employee or job applicant in a
manner that would be different but for that person’s gender
• Testing and education requirements may cause legal problems for the
employer. Yet, as a general rule, it is not unlawful for the employer to
hire or promote employees on the basis of results of professionally
developed ability tests provided the tests are not designed to be used or
used in a discriminatory fashion
© Cavico & Mujtaba, 2008
• The legal problem with personality tests involves the Civil
Rights Act and specifically the “adverse” or “disparate
impact” theory of liability
• There is no law that prohibits discrimination based on
personal appearance alone; but appearance requirements
may be an unlawful employment practice if they have an
effect of significantly discriminating against minorities and
other protected categories
• As of the writing of this book, the federal courts, even the
very liberal Ninth Circuit Court of Appeals in San
Francisco, have been unwilling to equate sexual preference
to a protected category under the Act
• Parental status also is not a protected category under the
federal Civil Rights Act
© Cavico & Mujtaba, 2008
The Bona Fide Occupational Qualification
Exception to the Civil Rights Act
• An employer is allowed to discriminate on the
basis of religion, sex, or national origin if such
characteristics are reasonably necessary to the
normal operations of a particular business and job
performance
• In order to be a BFOQ, the characteristic must
affect the employee’s to do the job and must relate
to an essential aspect of the job or a central
mission of employment
• Race and color can never be BFOQs
© Cavico & Mujtaba, 2008
Title VII and Language
Discrimination
• Discrimination based on language is a form of national origin
discrimination and consequently may violate Title VII of the Civil
Rights Act
• If an employer requires the use of the English language at all times and
at all places in the workplace, such an “English only” rule will be
presumed discriminatory and invalid
• If the employer’s “English-only” policy is limited to working times (as
opposed to meal and “break” times) and working areas (as opposed to
the lounge, rest, snack, or cafeteria areas), then the policy may be
upheld by the courts, but only if the employer can demonstrate a
reasonable and legitimate business purpose for mandating the limited
use of the English language only
• National origin discrimination charges also may arise when an
employer discriminates against an employee or job applicant who has
limited English language proficiency or who has a foreign accent
• The key test, according to the courts and the EEOC is whether the lack
of English language fluency or the foreign accent interferes with the
employee’s ability to perform the job
© Cavico & Mujtaba, 2008
Title VII and Sexual Harassment
• Sexual harassment in the workplace in the U.S. is considered
to be a form of sexual discrimination and thus is a violation of
Title VII of the Civil Rights Act
• Sexual harassment consists of unwelcome sexual advances,
requests for sex, as well as other physical or verbal conduct of
a sexual nature
• Sexual harassment law divides this legal wrong into two main
categories: 1) quid pro quo and 2) hostile environment
• The first type of sexual harassment arises when an
employment benefit is conditioned by a manager or supervisor
on an employee’s willingness, or lack thereof, to engage in
sexual conduct
• The second type of sexual harassment arises when the work
environment degenerates into a hostile, abusive, or offensive
one based on sex
© Cavico & Mujtaba, 2008
• The U.S. Supreme Court has delineated four factors to be
used in answering the “hostile” question: 1) the frequency of
the conduct, 2) the severity of the conduct, 3) whether the
conduct was physically threatening or sexually bellicose or
ridiculing, or humiliating, and 4) whether the conduct
interferes with the employee’s work performance
• the sexual harassment is committed by a manager or
supervisor in the aggrieved employee’s management
hierarchy, and if the employee suffers some type of tangible
job loss, harm, or injury, then the employer is absolutely liable
for the sexual harassment
• if the sexual harassment is committed not by the aggrieved
employees direct managers or supervisors, but by the
employee’s co-workers, or if the aggrieved does not suffer any
tangible job loss, the employer has a defense to liability
© Cavico & Mujtaba, 2008
Sexual Harassment and Cultural
Conflicts
• It is a common practice for some Hispanics to be very open about
touching each other, including the opposite sex
• In the Arab world the greatest sign of trust is to “share one’s air.” This is
a practice where Arab men literally touch noses with their business
associates in an intimate gesture of trust where air from one’s breath is
shared with the other. In the U.S. where one’s “space” is considered a
protected area this could create a noticeable hostile environment as
defined by the Act
• The issue of sexual harassment and the cultural differences therefore,
will be an interesting one that the courts still have not comprehensively
addressed at the present. This topic may become the new, fertile ground
that leads to the next big “wave” of discrimination claims and lawsuits
© Cavico & Mujtaba, 2008
Affirmative Action – Constitutional,
Ethical, and Practical Concerns
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The term "affirmative action" represents a wide variety of programs, from one
extreme of setting rigid, fixed, job quotas that must be filled by women and
minority group members, to the other most "mild" extreme of taking special
proactive efforts to ensure that women and minority group members are
included in the pool of applicants for hiring or promotion
The United States Supreme Court, in a very significant affirmative action
decision in June 2003, permitted the use of race as a preference factor in the
college admissions process, but the court also issued a stern warning that
colleges cannot use rigid affirmative action systems that resemble quotas and
that they also must adopt race neutral policies as soon as practicable
As part of an affirmative action plan, a company can engage in various
proactive diversity efforts to attract and maintain a more balanced workforce.
These efforts would encompass targeted recruiting, increasing the pool of
qualified women and minority applicants and candidates, mentoring, and
training in diversity awareness
Diversity awareness training not only enables a firm's employees to recognize
but also to appreciate differences among individuals and to value the
uniqueness in every person
© Cavico & Mujtaba, 2008
The Age Discrimination in
Employment Act of 1967
• The ADEA of 1967 is a U.S. federal law which prohibits an employer
from failing or refusing to hire a protected individual, or discharging an
employee within the protected age category, or otherwise discriminating
against such individuals, because of their age regarding compensation and
the other terms and conditions of employment. The ADEA covers hiring,
termination, compensation, as well as other terms and conditions of
employment
• In order to be protected, the employees must be at least 40 years of age.
There is no upper level age limit to the statute’s coverage
• ADEA does not bar the termination of older employees; rather, the Act
only bars discrimination against them
• the ADEA does not specifically prohibit an employer from asking a job
applicant’s age or date of birth. Yet, because such questions may inhibit
older workers from applying from employment or may be construed as
evidence of an intent to discriminate based on age, any requests for age
information will be examined closely by the EEOC and the courts to
ensure that the age inquiry was made for a valid, lawful, and nondiscriminatory purpose
© Cavico & Mujtaba, 2008
The Pregnancy Discrimination
Act of 1979
• This statute mandates that employers not discriminate against
women employees who become pregnant and give birth. The
statute protects married and unmarried women workers. All
aspects of employment are covered. Pregnancy must be
treated “merely” as any other temporary disability. Employers
with health and disability policies must also cover pregnancy.
Moreover, an employer cannot force a pregnant employee to
stop working until the child is born, provided the employee is
capable of performing its duties properly. Finally, the
employer cannot specify how long a leave of absence must be
taken after childbirth. Paid leave, however, is not required by
the statute, though such paid leave is very common in Europe,
and even for fathers in some countries.
© Cavico & Mujtaba, 2008
The Americans with Disabilities
Act of 1990
• The primary goal of the statute is to prevent discrimination against
otherwise qualified disabled workers so as to allow such workers to
participate fully in the workforce. The ADA, however, not only covers
employers, but also the providers of public transportation and public
accommodation as well as the providers of telecommunications services
• Employers and others are legally required to a degree to accommodate
the needs of their disabled employees
• Small employers are not covered as an employer must have 15 or more
employees to be governed by the ADA
• People who are using illegal drugs or alcoholics who use alcohol in the
workplace or who are under the influence of alcohol in the workplace are
not “disabled.” However, recovering alcoholics and former users of
illegal drugs are regarded as “disabled” and thus are protected by the
ADA
• The ADA imposes on the employer an affirmative duty to make a
reasonable accommodation to the needs of its disabled employees. If the
disabled employee can do the job with a reasonable accommodation, then
the employer must make that reasonable accommodation
© Cavico & Mujtaba, 2008
Civil Rights Act of 1991
• The Civil Rights Act of 1866 (also known as “Section 1981”) gave
black employees the right to sue employers for damages in cases of
employment discrimination, and played a prominent role in the debates
surrounding the 1991 Act. The 1991 Act however, actually amended
the Civil Rights Act of 1964 to correct unfavorable Supreme Court
decisions
• The 1991 Act confirmed that racial harassment on the job was included
in antidiscrimination laws and clarified that Section 1981 applied to
both government and private sectors
• The 1991 Act also authorizes jury trials on Title VII claims and allows
the injured parties to recover emotional distress and punitive damages,
while imposing caps on such relief under both Title VII and Section
1981. The 1991 Act also made technical changes affecting the length
of time allowed to challenge unlawful seniority provisions, to sue the
federal government for discrimination, and to bring age discrimination
claims
© Cavico & Mujtaba, 2008
The Family Medical Leave Act of 1993
• The Family Medical Leave Act (FMLA) guarantees that employees may
take up to 12 weeks of unpaid leave (in one 12 month period) for serious
medical problems that render the employee unable to perform his or her
work duties, as well as to take care of family needs, such as the birth or
adoption of a child, or the care of a child, spouse, or parent with a serious
medical problem
• The FMLA applies to private sector employers who have 50 or more
employees, as well as to federal, state, and local government employers.
To be covered, an employee must have worked for the employer for one
year previous to taking the leave
• once an eligible employee returns from leave, he or she must be restored
to the same or equivalent work position, but with no accrual of seniority
for the leave period
© Cavico & Mujtaba, 2008
United States Labor Laws
• Labor law and labor relations in the U.S. today are based on three
major pieces of federal legislation: the National Labor Relations Act,
also called the Wagner Act, of 1935; the Labor Management Relations
Act, also called the Taft-Hartley Act, of 1847; and the Labor
Management Reporting and Disclosure Act, also called the Landrum
Act, of 1959. The Norris-LaGuardia Act of 1932 was the precursor to
all these important statutes as that Act was the first piece of legislation
promulgated in the U.S. to protect the rights of employees and to allow
employees and unions to engage in union activity. The goals of these
statutes are to approximately balance the power between labor and
management, to encourage peaceful negotiation and collective
bargaining between labor and management, to recognize selforganization of employees as vital to collective bargaining, to restrain
certain unfair labor practices by both employers and unions, and
thereby to maintain labor peace and to sustain economic productivity
© Cavico & Mujtaba, 2008
The Norris-LaGuardia Act of 1932
• A variety of legal doctrines and procedures were being utilized to hinder
union organizing and collective bargaining. The main four legal
hindrances were injunctions, contracts called “yellow dog” contracts, the
doctrine of vicarious liability, and the conspiracy rule
• A “yellow dog” contract was a contract in which the employer required
the employee to sign, in which the employee promised not to join a labor
union on penalty of losing his or her job
• the Norris-LaGuardia Act, Congress declared generally that employees
must have the rights of freedom of association and self-organization with
their fellow employees, and that the employees must be free from
employer interference and restraint in pursuing these objectives
• The Act also held that individual union members or the union would not
be accountable for unlawful acts unless the acts were directed or ratified
by the members of the union
© Cavico & Mujtaba, 2008
The National Labor Relations Act
(Wagner Act) of 1935
• The National Labor Relations Act (NLRA) was a response to the
economic collapse and the Depression of the 1930s as well as the
emergent New Deal
• Congress’ major objective with the NLRA was to equalize the disparity
of bargaining power between employees and employers as well as to
effectuate the national policy of collective bargaining as the means to
ensure labor peace and economic productivity
• The basic provisions of the Act are found in Sections 7 and 8. Section
7 guarantees certain fundamental rights for employees, specifically the
rights to form, join, or assist labor organizations, the freedom to
bargain collectively through a representative of their own choosing,
and the right to engage in mutual concerted activity for the purposes of
collective bargaining and for the employees’ mutual aid and protection
© Cavico & Mujtaba, 2008
• Section 8 imposes certain important duties on employers,
particularly the duty bargain collectively and in good faith
with the representative of the employees
• Section 8 also forbids the employer from committing certain
prohibited practices, which Congress believed would
discourage true collective bargaining, by declaring such
practices as unfair labor practices
• the National Labor Relations Board (NLRB) is the
administrative agency created by Congress to administer the
NLRA
• NLRA. It is not a complete labor code, as many countries
have. The statute is concerned primarily with the organizing
stage of labor relations, and it deals exclusively with private
sector employer practices
© Cavico & Mujtaba, 2008
The Labor Management Relations Act
(Taft-Hartley Act) of 1947
• The Labor Management Relations Act (LMRA) amended the NLRA.
The LMRA was promulgated as a response to the rise of increasing
powerful national unions in the U.S. and the more frequent use by
unions of the strike and the secondary boycott
• The basic provisions of the LMRA were the prohibitions of certain
union unfair labor practices, in particular the secondary boycott
• The LMRA also upheld collective bargaining as the preferable method
to keeping labor peace and settling labor disputes
• The LMRA required both management and the union to notify the
Service whenever any change in the terms and conditions of
employment previously set by a collective bargaining agreement was
sought
• The LMRA also banned the “closed shop,” which was a union demand
that required union membership even before hiring by the employer.
The “closed shop” must be distinguished from a “union shop,” which
requires employees to join and to continue as union members while
their employment lasts
© Cavico & Mujtaba, 2008
The Labor Management Reporting and
Disclosure Act (Landrum-Griffin) of
1959
• The Labor Management Reporting and Disclosure Act (LMRDA),
which amended the LMRA, was a response to the rise of very powerful
union leaders, an increase in union corruption and the lack of
democratic procedures by unions. The purpose of the LMRDA was to
impose regulations on the internal affairs of unions and to promote
democracy and honesty in union affairs. Unions were now required to
file reports to the Secretary of Labor regarding union assets and
liabilities, internal laws and procedures, especially union elections,
receipts and expenditures, and salaries of and loans to union officers
• The “Bill of Rights” for union members granted them equal rights in
voting, meetings, opportunity to be heard, and in opposing the union.
The Act also forbids unions from disciplining members for exercising
rights given to them pursuant to the LMRDA.
© Cavico & Mujtaba, 2008
The Social Security Act of 1935
• The Social Security Act is the key federal law that creates an
insurance program to provide for employees and their
families upon the retirement, death, disability, or
hospitalization of the employee
• The Federal Insurance Contributions Act (FICA) requires
both employees and employers to contribute to the Social
Security Fund to help pay for the employees’ benefits. The
employee’s FICA contribution is based on the employee’s
annual wage, which amount the employer withholds from
the employee’s salary, and then matches, and next turns the
money over to the Internal Revenue Service
© Cavico & Mujtaba, 2008
The Federal Unemployment
Tax Act of 1935
• The Federal Unemployment Tax Act (FUTA) requires
employers to pay unemployment taxes which go into a
fund administered by the state governments to pay
compensation to workers who are temporarily
unemployed. The states determine which workers are
eligible for compensation as well as the amount and
duration of compensation. To be eligible for benefits,
workers must be seeking employment and be available for
work. Moreover, workers who have been discharged for
misconduct or who have quit without just cause are not
eligible for unemployment benefits
© Cavico & Mujtaba, 2008
The Fair Labor Standards Act of
1938
• The FLSA generally speaking protects workers and prohibits oppressive
child labor. The FLSA covers all employers and employees who are
engaged in the production of goods for interstate commerce. However,
there is one important exception to the Act; that is, executives,
administrators, managers, professionals, outside sales personnel, and
computer employees are exempt from the overtime provisions of the Act
• the FLSA mandates that a minimum wage, set by Congress be paid, and
that overtime pay of “time and a half” be paid to employees for each hour
worked beyond 40 hours a week
• Each week is treated separately for overtime purposes
• There are three main types of restrictions on child labor: 1) Children
under the age of 14 cannot work except in very limited circumstances. 2)
Children ages 14 or 15 can work for limited hours in certain nonhazardous occupations approved by the Department of Labor. 3) Children
ages 16 or 17 can work unlimited hours in non-hazardous jobs
© Cavico & Mujtaba, 2008
The Employee Retirement Income Security
Act of 1974
• The Employee Retirement Income Security Act (ERISA) is designed
to protect the pensions of private sector employees.
• The Act does not require an employer to establish a pension plan.
However, once an employer does have a pension plan, ERISA
empowers the Department of Labor to regulate the management of
such a plan
• No more than 10% of the assets of the pension plan can be invested in
the securities of the employer that established the plan
• ERISA also regulates the “vesting” of an employee’s pension.
“Vesting” means the time when the employee has a non-forfeitable
right to receive his or her pension benefits
• There are two fundamental ERISA vesting rules: 1) the employee’s
own contribution to his or her pension plan vests immediately; and 2)
the employer’s contribution to the employee’s pension fund can be
forfeited up to a five year period; but once that five year period is
reached, the employer’s contribution is totally vested
© Cavico & Mujtaba, 2008
The Consolidated Omnibus Budget
Reconciliation Act of 1985
• The Consolidated Omnibus Budget Reconciliation Act
(COBRA) provides for the continuation of group health care
benefits for private sector employees who have left the
employer’s employment for a variety of reasons, voluntary as
well as involuntary (except for workers discharged for gross
misconduct). COBRA is a very complex statute, but in
essence requires that the employee, or his or her
beneficiaries, be given the opportunity to continue with the
employer’s group health, dental, and/or optical insurance for
a time period of up to 18 months and longer if the employee
is disabled. Employees, of course, are still required to pay the
group health insurance premium to remain covered by the
employer’s policy
© Cavico & Mujtaba, 2008
State Workers’ Compensation
Statutes
• State workers’ compensation statutes are designed to protect workers
injured on the job
• An injured worker is compensated, though in a limited manner,
pursuant to a state administrative system and a state fund; but the
worker is precluded from suing the employer in court for negligent
infliction of injuries
• The employee, however, can still sue if the employer intentionally
injured the employee
• these statutes only protect workers who are accidentally injured during
the course and scope of employment. Fault is not an issue; but the fact
that an injury was intentionally self-inflicted would obviously prevent
the employee’s recovery
© Cavico & Mujtaba, 2008
The Occupational Safety
and Health Act of 1970
• The objective of the Act is to impose a duty on the employer to provide a
workplace free from recognized hazards causing or likely to cause death or
serious bodily injury
• The employer is obligated to comply with all OSHA health and safety
standards. There are also reporting, notification, and posting requirements
imposed on the employer relating to workplace incidents
• The coverage of the Act is very broad, covering any employer who
employs at least one employee. There are only two exceptions to the Act:
one for employers who are covered by other safety and/or health acts, such
as the Mine Safety Act; and the other for employers of domestic household
employees
• OHSA is enforced by the Department of Labor, which is authorized to
conduct inspections of businesses pursuant to an administrative warrant,
and which can impose civil penalties on an employer for violating the Act
© Cavico & Mujtaba, 2008
The Worker Adjustment and Retraining
Notification Act of 1988
• The purpose of WARN is to mandate that employers give notice to the
employees before a plant is closed. WARN applies to employers with 100
or more employees; and it requires that employers give 60 days notice
before closing a plant, temporarily or permanently, which would result in
the loss of employment of 50 or more employees
• The notice is also required for large employee layoffs, specifically a
reduction of 1/3rd of the workforce or 50 employees. There are two
exceptions to WARN when the employer does not have to give notice: 1)
where the closing or layoff was caused by business circumstances which
the employer reasonably could not foresee; and 2) where the employer is
seeking to obtain financing to keep the plant in operation and the
employer in good faith believes that giving the notice would be inimical
to the securing of financing
© Cavico & Mujtaba, 2008
The Immigration Control and
Reform Act of 1986
• The main feature of the Immigration Control and Reform Act
(ICRA) is that the statute makes it unlawful for an employer to
hire illegal immigrants. All U.S. employers are required to
complete an immigration form (INS Form I-9) for each employee,
which form attests that the employer has inspected the
documentation of the employee and that the employee is a citizen
or permanent resident or possesses an appropriate work visa or is
otherwise qualified to work in the United States
• While the U.S. is debating amnesty for illegal aliens, the French
are taking a completely different approach. The French
government is now offering cash payments – the equivalent of
$2,400 per adult and $600 per child – to illegal aliens who agree
to leave France voluntarily and to return to their native countries
© Cavico & Mujtaba, 2008
The Electronic Communications
Privacy Act of 1986
• ECPA makes it a legal wrong, criminal as well as civil, to intercept or
access electronic communications, whether stored, in transit, at point of
transmission, or after receipt, as well as to intercept or access email,
whether stored or in transmission
• There are four important exceptions in the ECPA: 1) Employers can
access the stored email communications of employees who use the
employer’s electronic communication service. 2) Government and law
enforcement agencies can obtain electronic communications during an
investigation of suspected illegal activity, though pursuant to a valid
search warrant. 3) The “business-extension” exception of the Act allows
employers to monitor employees’ electronic communications made in
the ordinary course of business (but it does not permit the employer to
monitor the employees’ personal communications). 4) If the employer
obtains the employees’ consent to having their electronic
communications intercepted by the employer, the employer can avoid
liability under the ECPA
© Cavico & Mujtaba, 2008
The Employee Polygraph
Protection Act of 1988
• The Act makes it illegal for most private sector
employers to use polygraph tests; but federal
and state governments are not covered. There
are numerous exceptions where polygraphs are
permitted in the private sector, for example, for
matters involving national security, public health
and safety, drug manufacture and distribution, as
well as investigations of theft, embezzlement,
and espionage, though in the latter three
investigative cases the employer must possess a
reasonable suspicion of the employee’s
involvement before ordering a polygraph
© Cavico & Mujtaba, 2008
Summary
• Legal complexity naturally results from the globalization of business –
in the employment field and otherwise. Foreign firms consequently
must be keenly aware of U.S. law; and also U.S. firms must be aware
of not only foreign law, but also the extraterritoriality of U.S. laws
• The Civil Rights Act, the ADA, and the ADEA now have been
amended to include protection for U.S. employees working overseas
for U.S. firms. Thus Title VII, the ADA, and the ADEA currently are
coextensive in their extraterritorial effect. These Acts accordingly have
a very broad extraterritorial reach, encompassing not only U.S. firms
doing business in the U.S. and overseas, but also U.S. controlled firms
• Failure to be cognizant of U.S. employment discrimination law,
including its extra-territorial aspects, as well as the labor law of the
host country, will result in increased exposure to legal liability for the
multinational firm
© Cavico & Mujtaba, 2008
Reference
1.
2.
Cavico, F. & Mujtaba, B. G., (2008). Business Law for the Entrepreneur
and Manager. ILEAD Academy Publications; Davie, Florida, USA. ISBN:
978-0-9774-2115-2.
Cavico, F. and Mujtaba, B. G. (2008). Legal Challenges for the Global
Manager and Entrepreneur. Kendal Hunt Publishing; United States.
© Cavico & Mujtaba, 2008