EXAM 3 Flashcards
How is Sole Proprietorships taxed?
income is taxed to the individual owner of the business
Know the two disadvantages of a sole proprietorship
1 - Hard to raise capital
2 - Unlimited personal liability
Know the things typically found in partnership agreements.
ownership shares
Know what the court in Norris v. Besel held regarding the wife’s status as a partner
Shelly is not liable as her role in the business did not indicate partner status.
(You are a partner if you have control and profit)
Know what requires partners to act in good faith toward the partnership
Fiduciary duties
Know the disadvantage shared by sole proprietorships and partnerships
Unlimited liability
Know what the court in Eagles Landing Development, LLC v. Eagles Landing Apartments, LP said about the liability of limited partners for the debts of a limited partnership
Limited partners are not liable for the limited partnerships
Know what you do to create a corporation
You file articles of incorporation with the state
Know what constitutional rights a corporation does and does not have
1 - Have first amendment rights
1 - don’t have the 5th amendment they cannot plea the fifth
Know the duty of loyalty owed by a director to the corporation means
They have to put the interest of the corporation ahead of their own interest
Know what corporate dissolution means
End the corporation by liquidating all the assets paying off debts and distributing what’s left to the owners
Know what a professional corporation is
For professionals like doctors and lawyers so they can practice their limited licenses as well.
Know the advantages of a Limited Liability Company
Limited liability (Liability shield) and taxes don’t have to pay taxes twice (Pass through taxation)
Know what must be in a LLC’s articles of organization
Whether it is manager managed or member managed.
Know the limitations on transferring ownership of an LLC.
Normally you can’t sell your membership interest without the consent of the other members
Know what an LLC operating agreement is
A contract among members of a limited company setting forth the parties’ agreements about funding, development, operations, and other key issues of the LLC
Know what In re 1545 Ocean Avenue, LLC said regarding the requirement for a court dissolve an LLC
If the 1545 LLC cannot effectively operate under the operating agreement to meet and achieve the purpose for which it was created.
Limited liability is the advantage of what two types of businesses
Corporations and LLCs
Know what the court in State Ex Rel. Yost v. Leonard held regarding piercing the corporate veil when the owner knew of environmental problems the LLC had but did nothing to stop them
He’s personally liable
Someone who receives a promissory note has the option to sell it to another party
True
Know what results when a negotiable instrument is transferred by negotiation
The party who bought it takes it free and clear of any problems the negotiable instruments had.
If an instrument turns out to be nonnegotiable, what law applies to disputes regarding the instrument?
It’s the common law of contracts
Know the requirements to be a holder in due course
You paid value and took it without knowledge of any problems
Know the four types of negotiable instruments
1 - drafts
2 - checks
3 - notes
4 - certificates of deposits
Know what the Whitaker v. Wedbush Securities, Inc. court said regarding the defendant brokerage firm was a bank under the UCC
Under the UCC rules wedbush was effectively a bank and responsible for the loss
Know the UCC definition of a note
Two parties
- the borrower
- the lender
Know the UCC definition of a draft
It has three parties
- Payor (you)
- Payee (bank)
- Beneficiary (business)
What do you call an agreement to provide security in real property?
Mortgage
What do you call a pledge of personal assets as security for the debt of a business?
Guarantee assurance / collateral?
Know what the General Electric Business Financial Services v. Silverman court said about asserting defenses based on oral agreements that modified the written guaranty contract
Oral agreements cannot change the written document
If a surety pays the principal’s debt, what rights does the surety have against the principal?
Guarantor can sue the principal they payed for
Know which part of the UCC regulates credit and financing for personal property
Article 9 security interest
Know what perfection means under UCC Art 9
Where you register your security interest where the whole world can see it usually with a Secretary of State
Know how to perfect a security interest
1 - Register it with a Secretary of State
2 - take the title
3 - hold the property
Know the holding of Fordyce Bank and Trust v. Bean Timberland about buyers in the ordinary course of business
- Timber won because of course of business.
- Bank gets nothing from the company because timber were not responsible for the security interest.
Know the definition of mechanic’s lien
You provided work or material to improve real property and you weren’t payed.
Know what the court in Cit Bank, N.A. v. Heirs said about priority of liens based on perfection
Cut bank wins because they perfected it/registered it first.
People with higher than average income have to file Chapter 13 instead of Chapter 7 bankruptcies
Chapter 13 - payment plan bankruptcy
Chapter 7 - liquidation bankruptcy only people with the lower income can file 7.
Know what the In the Matter of Kmart Corp. court held regarding paying some critical-vendor creditors in full while not paying other creditors.
Bankruptcy Court held that it was the best decision for the debtors, Kmart paid 300 million to 2,330 suppliers. It decided who were critical vendors.
Appellate court decided that’s not how it works thus they are not allowed to do so.
[[[There is a payments schedule in the bankruptcy code and you must follow it.]]]
Know the definition of an Agent’s authority
An agent can change the legal status of the principal. (They are given authority over the principal)
Know the factors used to determine a principal’s ratification of an agent’s activities
Ratification is when the agent makes an unauthorized deal the principal finds out about it later but keeps it.
Four factors
1 - when aware of the key facts
2 - if the agent purported the act for the principal
3 - the principal must ratify the agreement before the third party involved withdraws
4 - the agreement was required by law to be in writing
Know what apparent authority is
When the principal does something to make the agent believe the agent has authority
Know what the court in Cove Management v. AFLAC said about an agent’s conduct creating apparent authority
The plaintiff made no effort to find out whether galgano was an independent contractor or an agent of AFLAC thus they cannot find that galgano was acting under apparent authority. It was affirmed it was dismissed.
Know what the Lang v. Lions Club of Cudahy Wisconsin, Inc. held regarding a subagent enjoying the same immunity the Principal enjoys
If you can’t sue the principal you can’t sue the agent
In Beef Belt, LLC v. Campbell Burgess, what did the court decide regarding an agent who did not negotiate the contract for the principal?
There was no evidence placing burgess as the principal thus the case was reversed and remanded in the appellate court. He had no involvement negotiating the contract thus not liable.
Know what the France v. Southern Equipment Co. Court said regarding a Principal’s liability for actions of an independent contractor when the Principal has no control over the independent contractor
He can’t sue southern equipment because they didn’t control him they had no liability to him. He can sue his contractor.
Know the determinative factor in deciding whether a master-servant relationship exists
(Control) If the principal controls the agent then the principal is liable.
Know the least determinative factor in deciding if an employer has hired an employee or an independent contractor.
(Compensation)
Are employers liable for forts torts committed by employees in the scope of their employment?
Yes employees are liable for torts that they commit during their employment.
Know that at-will employment means employees can be fired for any reason or no reason. Even if the reason they are fired is a morally wrong one
At will employment means you can leave whenever you want and you can also get fired for whatever reason.
Know what happens when employment at will is limited by an express contract
They cannot fire you even if it’s at will. Unless otherwise stated in the contract.
Know what happens when employment at will is limited by an implied contract
They can’t fire you as long as you don’t violate the implied contract.
Know what Guz v. Bechtel National held regarding firing an employee in violation of an implied covenant of good faith and fair dealing
The company never implied anything to make him believe he wouldn’t be fired thus he lost
What can employee handbooks do to at will employment?
They can change the at will employment, it states offenses which can cause the employee to be fired or disciplined. (Such handbook creates express or implied contracts that limit the presumption of employment-at-will)
Will signed disclaimers regarding employee handbooks stop employers from making implied contracts that limit at will employment?
No
Know the common problems with employee handbooks
- using boilerplate forms that include material not relevant to the employer
- making promises about discipline procedures that are not followed consistently
- creating probationary periods that imply permanent status once probation has ended
- failing to change the handbook to comply with state and federal laws as they change
- listing offenses that can be grounds for termination creating the impression those are the only rules that matter
- not giving a clear at will employment statement and failing to specify that the employer has the right to change at any time
Do torts committed by agents outside the scope of their employment create liability for the Principal/Employer?
No it’s outside the scope of employment
If a potential employee has a history of problems related to a potential job, does an employer have a duty to not hire them? What is this called?
Negligent hiring
Know the name(s) of the tort for which an employer may be sued after firing an employee in violation of a public policy exception to at-will employment
Wrongful termination/wrongful discharge
The court in Marshall v. Montaplast of North America, Inc. held that there is no public policy protection from being fired for disclosing your supervisor is a registered sex-offender
There was no protection because it was at will employment and the employee was in private property when spreading the rumor
Know what the Zambelli Fireworks Mfg. v. Wood court said regarding an employee’s specialized knowledge gained from working for the employer
Zambelli won because wood couldn’t use their trade secrets of creating fireworks
Know when workplace drug testing is allowed
- pre-employment screening
- annual check or occasional testing
- random drug test when announced as a condition for employment
- drug test when incident has been upheld
- drug test given due to “reasonable suspicion”
- certified labs should be used to give proper tests
- employees should be given a copy of policy notice
OSHA health and safety standards have three purposes:
Address problems of significant health risk in the workplace, 2 address problems of safety at the worksite, and 3 eliminate recognized hazards
Know what the Manua’s Inc. v. Scalia court held regarding an employer being liable for actions of a contractor when the employer assigned its employees to be involved with the contractor’s work
They sent their employees to work with the contractor without training thus they are liable.
Know the objectives of workers’ compensation laws
1 - Reduce legal fees
2 - encourage employer interest in safety and rehabilitation
3 - promote discussion of the causes of incidents rather than encourage concealment
Know the exceptions for who is covered by FMLA(Family Medical Leave)
Top 10% earners or key employees.
Know what the court in O’Rourke v. Tiffany & Co. said about the requirement for retaliation in a FMLA case
She had no claim to FMLA violation because she was being fired for other reasons
Know what federal immigration law requires employers to do
Prove people have the right to work (legally).
Know what happens if an employer covered by the WARN act lays off more than 50 people without the required notice
If they weren’t given a 60 day notice the company owes them 60 days of back pay.
Know the description and objective of ERISA
Law that encourages private employers to provide retirement accounts for their employees. Objective is for their retirees to have a retirement fund.
Know which board was created to monitor labor practices and oversee union elections
National Labor Relations Board
Know which categories of workers are not covered by the National Labor Relations Act
If you work for the state or local government
Know the examples of employer conduct that violates the NLRA
1 - Threatening loss of jobs
2 - threatening close of a plant
3 - questioning employees about union activities
4 - promising benefits if they don’t support the union
Know what union organizers may not do
Cannot go on private property and conduct labor union activities there
Know what Dolgencorp, LLC v. NLRB case held about a union election after evidence of a union organizer making threats and bribes to employees surfaced
They didn’t invalidate it because the organizer denied any accusations
Know what good faith means in union negotiations
Have to come up with a deal that both parties will agree too
Know what a lockout is
When the employer goes in first and locks the doors to go on strike
Know the protected classes of Title VII
Race
National origin
Gender/sex
Color
Religion
Know what employers are required to do to avoid discrimination based on religion
Reasonable accommodations
Know what the McDonald case said about treating someone more harshly because they are white
It violates title 7 prohibition based on color
An employer letting males work overtime but not letting females work overtime is sex discrimination
True
Know what the Bostock v. Clayton County case held about discrimination against gay and transgender people
It’s Sex discrimination there for prohibited by title 7
Know the examples of pregnancy discrimination
- firing someone because no one wants to see a pregnant bar tender
- taking adverse action because someone can get pregnant, or will get pregnant
Know the holding of Harris v. Forklift Systems.
(when the work environment becomes hostile or abusive, company can be liable for it’s employee’s sexual harassment.)
Does Title VII restrict same sex harassment?
No it’s still sex harassment
Know the examples of age discrimination
If someone says they are retiring in 5 years you can’t use that against them. As long as they are older than 40
Disparate treatment
includes choosing the type of work assigned to employee’s based on their race
Know what the court in McDonnell-Douglas Corp. v. Green said about what is required to establish a prima facie case of employment discrimination
1 - belong to a protected class
2 - met the job qualifications
3 - was subject to an adverse employment action
4 - The action gave rise to an inference of discrimination
In a discrimination lawsuit, if the employer offers a job-relevant rationale for the decision, what must the plaintiff do next to win?
Show it’s a pretext. ( A made up reason)
Know what the Burlington Industries v. Ellerth Court said about a business being vicariously liable for its employee’s sexual harassment of another employee if the business did not have an effective anti-harassment policy
If there’s no clear person or place to report it then the business is liable.
Know what the appellate court decided about the motion to dismiss in Chaidez v. Ford Motor Co? 7 hispanic guys
It will go forward because there was a case of discrimination.
The case with seven hispanics applied to ford for jobs but didn’t get the jobs, they sued because the manager hired mostly black people (The manager was Black)
When employment practices are shown to discriminate against some employees, it is up to the employer to prove the practices are justified as a business necessity, are job related and therefore do not violate Title VII
Example a mine that are harmful to women thus only hire men
Know the definition of disability
A major life function that impacts a part of life activity.
It’s not A phobia or fear of something does not impact a major life activity so it is not usually a disability.
Know the examples of reasonable accommodations
- Making existing facilities accessible
- Job reconstructing
- Part-time or modified work schedule
- Acquiring or modifying equipment
- changing tests, training materials, or policies
- providing qualified readers or interpreters
- reassignment to a vacant position
If you become partially disabled but are still able to do some type of work, you are not protected from being terminated if your partial disability makes you unable to do your current job
True
If a potential employee volunteers disability information to the employer, the employer can ask questions to determine reasonable accommodations
If the employee says their disability then the employer can ask questions to make their work life better.
