Business Law 2275 Chapters 10-16.docx

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Western University
Management and Organizational Studies
Management and Organizational Studies 2275A/B

Chapter 10: Employment Law Employee v. Independent Contractor: - Control Test: o Degree of control exercised over an employee is greater than over an independent contractor. Decision maker? Risk bearer? - Organization Test: o Is person an essential or integral part of employer‟s organization o Or free to offer services to others Sources of Law: - Employment contract - Legislation o Employment Standards Act o Human Rights Code o Labour Relations Act o Occupational Health & Safety Act - Common Law The Employment Contract: - Non-Solicit Clause: o Agree not to take client‟s files or contact info when you leave - Non-Compete Clause: o Agree not to practice within geographic area for a specific time frame o Cannot be enforced if it is too restrictive o Constraints must be reasonable and would not adversely affect public - IMPLIED TERMS: o Employer‟s Duties  Provide safe environment, maintain equipment, reasonable pay o Employee‟s Duties  Work, obey instructions, honest, not divulge info, punctual - Termination of Employment Relationship: o Probation period, fixed term contract, express discharge, resignation 1. Give Reasonable notice or payment in lieu of notice - Provide time for employee to find similar work - Notice must be in writing (after 3 months) 2. Dismiss for “just cause” without notice HOW MUCH NOTICE OR PAY? Employment Standards Act: - Minimum termination pay or notice: o 1 week for less than 1 year, 2 weeks for more than 1 less then 3 years o 3 weeks for more than 3 and less than 4 years o 4 weeks for 4 years, 5 weeks for 5 years… 8 weeks for 8+ years - Employee entitled to wages owed within 7 days after the employment ends Common Law: - Courts Consider: Age/Ability to find/Responsibility/Position/Past Conduct - “Rule of thumb”  1 month per year of service Constructive Dismissal: - Fundamental change to the employment relationship o Ex: Change in pay or responsibility - Entitled to reasonable notice or pay in lieu of notice Terminating for “Just Cause”: - Serious misconduct, incompetence - Prejudicial conduct - Inability or unwillingness to work - Series of minor events If An Employee Disagrees With the Notice Given: - Employee starts a claim for wrongful dismissal - Employer must prove on a balance of probability that the employee was: 1) Terminated for cause OR 2) Provided with reasonable notice or pay in lieu of notice - Employee must mitigate damages Employment Standards Act: - Prescribes minimum standards: o Hours of work, overtime, wages, vacation, leaves, termination - HOURS  8 hours per day, 48 hrs/wk, Employee can work up to 60/wk o Overtime = 1.5 times pay for more than 44 hours per wk - VACATION  Minimum 2 wks per year or prorated, vacation pay 4% wages - Statutory Holidays  Paid regular wage + vacation pay o Total amout of wages earned in previous 4 weeks divided by 20 - Pregnancy Leave  17 weeks, Returns to same/relative position same pay - Parental Leave  35 weeks without pay, within first year of birth o Both cases if employee terminates employment, must give 4 weeks notice - Family Leaves  Up to 8 weeks without pay to care for family member Human Rights Code: “Every person has a right to equal treatment with respect to employment without discrimination because of race, ancestry, place of origin, colour, ethnic origin, citizenship, creed, sex, sexual orientation, age, marital status, family status, record of offences or handicap” Accommodate for Disability: - Required to adapt equipment and adjust workplace - Test = Undue hardship on the part of the employer ARE YOU DISCRIMINATING? 1. Is the requirement discriminatory? 2. If yes, is there a rational connection between requirement and performance of the job? 3. Was standard adopted an honest and good faith belief that the standard was necessary? 4. Is the standard reasonably necessary to accomplish the employer‟s legitimate purpose? Is it unreasonable to require the employer to accommodate the individual without suffering undue hardship? EX: Woman fire fighter could not pass running test introduced by gov‟t (Ms. Meiorin) - No evidence was shown that the prescribed aerobic standard was necessary - Employer failed to show undue hardship if a different standard were used Worker‟s Compensation: - Mandatory insurance coverage, paid for by fees assessed against employers - Worker usually gives up right to sue Health & Safety: (Federal/provincial legislation) - Provide safer working conditions, safe practices, education programs - Regulations provide boars to hear complaints and enforce compliance o Inspection & investigations procedures Mandatory retirement legislation  No longer in force in Ontario Employment Insurance: - Qualified unemployed entitled to benefits - Employers and workers pay into a fund, Decisions may be appealed to Board Collective Bargaining: - Governs union environments, collective bargaining - Canada Labour Code - Labour Relations Act (Ontario) - Labour relations board deals with disputes/grievances Organization of Employees: - Certification  Apply to board to be recognized as bargaining unit - Bargaining Agent  one per bargaining unit o Exclusive authority to negotiate with employer o Any contract negotiated is binding on all employees within the unit - Once collection agreement negotiated, then must be ratified by the members Unfair Labour Practices: - Legislation creates orderly process for organization & recognition of unions o Lays down specific rules of conduct o Prohibits unfair labour practices (coercion, intimidation, blacklists) o Threat of dismissal - Employer still allowed to convey info / views opposing union certification Bargaining: Collective Agreements - Parties must make every reasonable effort to reach an agreement - Either party can give notice to commence bargaining - Agreement must be ratified by both employees and employers Strikes & Lockouts: - Strike  Withdrawal of services by employees - Lockout  Action by employer to prevent employees from working - Work to rule  Employees do no more than minimally required by agreement Picketing: - Strikes gathered at a place of business providing info that dissuades people from doing business with employer o Permissible only when lawful strike is in progress o Must be peaceful and merely communicate information - Courts/labour boards may restrict picketing when regulations violated Public Sector & Essential Services: - People involved in essential services may have their right to strike limited - Public sector employees may be prohibited from participating in strikes o Ex: Teachers, firefighters, nurses, ambulance, police, hospital workers Chapter 11: Agency & Partnership Agents: - Represent and act for a principal in dealing with third parties - Agency is the service an agent provides on behalf of the principle - Agency relationship is created by the granting of authority by: o An express or implied contract o Estoppel / ratification - Contract should set out nature and extent of authority to act o Ex: authority of the agent, duties to be performed, payment - Contracts longer than one year must be in writing in some jurisdictions - Power of attorney is an agency contract under seal Authority of Agents: - Agency agreement sets out limits of agent‟s authority o Express authority when clearly stated o Implied authority  conveyed by actions of principal - Agent who exceeds actual authority may be liable for injury for their conduct - Sometimes principal is bound by an agent‟s apparent authority Apparent Authority: - Authority created by estoppel - A principal who acts in a way to make a third party believe that an agent has authority to act will be bound (even if no actual authority) - Estoppel Applies: o If a 3 party relies on the principal‟s representation (the principal‟s actions) that the agent has the authority to act, the principal cannot then claim the agent had no authority  Ex: If Sam hired Jane as sales manager for car dealership, she would have apparent authority to accept trade-ins o Previous actions of an agent can bind a principal  Ex: In the past, Green allowed to purchase cars, then told not to. Principal liable to innocent 3 party with whom had contracted before - Reasonable person test used to determine apparent authority  was it reasonable for the person to believe that the “agent” had authority to enter into the agreement o Home Buyers purchased mortgage insurance from insurance company through a bank. Bank doesn‟t forward application. Bank provided info and collected fees. It was reasonable for the home buyers to assume that the bank had authority to represent the insurance company and assume they had insurance Agent acting within authority  Principal is liable to third party Agent acting without authority  Did principal do anything to lead the 3 party to believe that the agent had authority to act?  YES: The third party relied on the actions and the principal is liable  NO: Would a reasonable person assume that the agent had apparent authority?  Yes: liable  No: not liable Ratification: - Principal can ratify a contract even if agent acted beyond both actual/apparent authority o Ex: Paris Hilton‟s chauffeur buys a car on her behalf even though he didn‟t have her actual or apparent authority. She liked the car and decided to keep it - Requirements: o Give the principal a reasonable amount of time to ratify o Agent must have been acting for a specific principal for ratification o Principal must have been capable of entering into the contract o Must be capable of performing the contract at the time of ratification o EX: cant ratify a contract for fire insurance after a fire o Inadvertent ratification by accepting a benefit o Ex: Paris driving the car on tour before giving back to the dealership Agent‟s Duties: - Must act within limits of a contract - May be liable for acting beyond authority (Breach of contract, sued for damages) - Must perform functions set out in agreement or liable for breach of contract - Owes duty of care of a reasonable person - Must exercise skill in a reasonable manner - Must not go against specific instructions o Ex: investment broker who didn‟t purchase shares as instructed, responsible - Cannot delegate responsibility unless stipulated in contract - Must account for funds - Must disclose all information to principal Fiduciary Duty: - Agent has duty to act only in the best interests of the principal o Cannot take personal advantage of opportunity because of position o Duty to disclose information that would benefit principal o Keep information in strict confidence o Must not compete with principal and must turn over all benefits Duties of Principal: - Principal must honour terms of contract (reasonable pay/reimbursement expenses) - Ambiguities will be interpreted in favour of broader agent‟s authority Undisclosed Principals: - Used when purchasing land for new projects - Agent may be held liable to a 3 party when acting for an undisclosed principal - If identifies acting for undisclosed principal, then agent not liable - 3 Party is usually bound to contract even when principal is undisclosed rd - If the identity of principal is important, then 3 party not bound by the contract o Ex: Theatre sold a ticket to a friend of someone on their banned list - Only identified principals can ratify a contract rd 3 Party Remedrds: - 3 Party can sue the agent when agent goes beyond authority (actual or apparent) o Breach of warranty (damages = reasonably foreseeable at start time contract) o Intentional deception on part of agent may lead to the award of damages o Tort remedies may be available for fraud or negligence  Ex: When the agent doesn‟t have authority  tort of deceit  Ex: If inadvertently exceed authority  tort of negligence  Ex: Damages may include loss of profits  If unusually high profits  not recoverable for breach of contract Vicarious Liability: - When agent is employee, principal may be vicariously liable for agent‟s torts - Where fraud is involved, principal may be liable even where agent is not an employee Termination of Agency: - Principal may give notice to withdraw authority from agent (no reasonable notice) - If agent‟s duties are changed, principle of frustration may terminate agent‟s authority - If agent is performing illegal acts - Death, insanity or bankruptcy of principal will terminate agency relationship Types of Business Organization: - Sole Proprietorship  An individual carrying on business alone o May hire employees, use agents, must comply with regulations o Unlimited liability for debts, personal tax rates, insurance o Cheapest form of business to operate, minimal expenses - Partnership  Group carrying on business together for purpose of making a profit o Agents of each other, own land, sue, regulated by Partnership Act:  Implies terms into partnership if no separate agreement  Sets out circumstances that do not create a partnership such as:  Owning property in common, sharing gross returns (commissions) o Must be ongoing relationship (not a single project) o Creation of a Partnership:  By Inadvertence  Implied from conduct  By Agreement  Primarily contractual relationship, can modify the act  Estoppel  Representations that a partnership exists  May be liable to others for injuries suffered if found o Agency Law applies to partners, contracts made by a partner are binding on all o Vicarious Liability  All partners are liable for torts of any partner o Partners‟ liability is unlimited, 3 party can collect from any partner o Fiduciary Duty  Must act in best interests of other partners o No right to salary/wages, major changes unanimous agreement (Act) o Dissolution  Notice of intent to dissolve can bring partnership to end OR  Death, Bankruptcy of a partner, Agreement, Illegality, Incompetence  Public notice to 3 parties to escape further liability  Debts are paid first, then share profits  If insufficient funds, look to partners‟ personal assets o Limited Partnerships:  Liable only to the extent of their investment  Ontario allows LLPs  Experts can limit liability (law firms/accoutants)  One person must have unlimited liability (manager) - Corporation  An incorporated company that is legal entity separate from founders Chapter 12: Corporations - An incorporated company that us a legal entity separate from founders - Limits liability of shareholders and directors - Provides flexibility for investors to buy and sell shares - Courts may sue officers/directors who avoid regulations/commit crimes - Individuals hold shares, “own or control” but not responsible for operations - Allows company to generate significant amount of cash - Can incorporate federally and provincially Process: - Filing of articles and granting of certificate - Used in rest of Canada and Federally (not BC or Nova Scotia) - Procedure: o Has features of both registration and letters patent systems o Not based on contractual relationship o Articles of incorporation contain constitution, purpose  Bylaws controlling day-to-day operation o Government body has no discretion to refuse request Other Incorporated Bodies: - Cities / Universities / Public institutions / Non-profit Societies CASE SUMMARY: Separate Legal Entity - Salomon ran a shoe manufacturing business, set up a corporation - Sold business to himself through the incorporated business - Loaned the incorporated company money to purchase business and set up a mortgage on the assets as collateral for the loan (became secured creditor) - Business failed - Creditors sought payment from Salomon personally - Court held that Salomon was a separate legal entity and creditors could not look to him for payment of their debts Capacity: - All corporations have the capacity of a natural person - Can enter into contracts, sue and be sued and can commit a crime Role of Agents: - All activities of a corporation are carried out by agents o Actual or apparent authority must be established o Employees may be able to bind the corporation o All agents have fiduciary duty to the corporation Funding the Corporation: - Shares  Means of providing capital from a large number of sources o No par values  Value of share is determined by the market o IPO  prospectus prepared to entice investors - Debt  Mortgage, bonds/ debentures Special Rights & Restrictions: - Different classes of shares affect rights of shareholders - Preferred shares  Shareholder gets preference when dividends are declared but typically no vote o Dividends may be cumulative o If dividends not paid  preferred shares convert to voting shares o Restriction on the transfer and sale of shares often imposed where the company is closely held - Common shares  not entitled to dividend, voting shares Types of Corporations: - Closely Held Corporations: o Few shareholders o Shares not sold openly on stock market o Private corporation (non-reporting) - Broadly Held Corporation: o Public share offering o More highly structured and regulated (reporting and disclosure) Directors: - Elected and accountable to shareholders - Owe a duty to the company to be careful o To exercise the care, diligence and skill of a reasonably prudent person o Ex: Air Ontario case where directors forced out Deluce family so that Air Canada could buy out the Deluce family interest - Owe a fiduciary duty to the corporation, not the shareholders, to be loyal, act in best interest of corporation, to avoid conflicts o Any gains payable to the corporation, any losses borne by the director o If conflict, must disclose, avoid discussing and abstain from voting - Shareholders can bring a derivative action (representative) on behalf of the company against the directors o Action is brought in the interests of the corporation o Minority shareholder of a private corp. brought an action against a director of the corporation who had set up a competing business - Obligations: o Some duties imposed by statute (OBCA or CBCA) - May be personally liable for: o Unpaid wages, unpaid taxes, breaches company employment standards o Damage to the environment (defense = due diligence) o Due diligence = kept informed, what was corp doing  Took reasonable steps to avoid the problem - Cannot use inside knowledge to their advantage  Martha Stewart case Officers & Senior Executives - Responsible for day-to-day management o Fiduciary duty, duties of care & competence o Statutorily imposed duties similar to those of directors Shareholders Rights & Remedies: - Access to the records and financial reports - Receive notice of annual general meetings - Right to vote on major changes - First offer of new shares - Derivative (representative) action o Ex: Shareholder start action on behalf of corporation against shareholder - Oppression action o Shareholder sues directors/corp if taken action against one holder ADVANTAGES of Incorporation: - Limited Liability: o Unless directors/officers give personal guarantees for loans o Courts hold principals liable for company‟s obligations o Shareholders protected from claims against the corporation - Tax advantages may be gained = 15% - Succession & Transferability o Continues to exist after death of a shareholder o Shares can be transferred at will - Shareholders owe no duty to the company - Shareholders elect directors who appoint managers so are removed from day- to-day operation of company DISADVANTAGES: - Major changes in structure/purpose must be reflected in incorp documents - Position of minority shareholder is weak - Most expensive way to operate a business o Ex: Must have audited financial statements, must file annual minutes Termination of Corporation: - Dissolution of a company can take place in a number of ways o Winding up provisions in incorporation documents o Voluntarily by the directors, Involuntarily by a creditor o Failure to file annual report automatically dissolves corporation Chapter 13: Personal, Real & Intellectual Property Types of Property: - Real property  land and anything permanently attached to it - Personal property  Moveable items o Tangible property or chattels  Can be weighed and measured o Intangible  Intellectual property creative works, goodwill, TM..  Chose in action  a claim against someone that has value Personal Property: - Moveable things that have become attached to land/buildings become part of real property except for  trade fixtures, incorporated into structure of bldg Finder‟s Keepers: - Only person who has a better claim to goods that are found is original owner - Depending on where it is found: o Public Space  Finder Private Space  Owner - Finder obligation to return found goods to proper owner when possible Bailment: - When person (bailee) acquires temporary possession of a chattel by arrangement with the owner o Fungibles  Similar and indistinguishable goods  Exact goods need not be returned o Bailee is liable for damage done to goods while in possession - Bailment for value  Mutual benefits to parties o Ex: Goods being warehoused or transported o Contract may determine level of care owed o Business relationship  Duty based on standards expected in industry  Or stated in contract - Gratuitous Benefit  Only one party receives benefit o Ex: Borrow a neighbors‟ wheelbarrow, borrower has a high duty of care but move away and negligence applies - Involuntary Bailment  Goods left without permission, o No duty until goods accepted Real Property Legal Interests in Land: - Fee Simple  Right to use land subject only to local restrictions (ownership) - Life Estate  Upon death, tenant property reverts back to original owner - Leasehold Estates  Land Leased to a tenant for a definite period of time Lesser Interests in Land: - Easements  right to use a portion of another‟s land for a particular purpose - Right of way  right to cross another‟s land, share a driveway - License  gives person permission to use another‟s land - Adverse possession  public use of private land gives right to it (squatters) - Restrictive Covenants  Designated restrictions on how land can be used Tenancy: - In Common  2 ppl share an undivided interest in property with each owning o If you die, portion goes to your heirs - Joint Tenancy  2 ppl own the entire property (includes right of survivorship) Transfer of Interest in Land: - Example of Agreement of Purchase & Sale - Registration of docs related to land transactions creates accurate title trail - Land Titles System: o Central registry prepares certificate of title which determines interest o Binding evidence of transaction o Government guarantees title o No transfer of title with mortgages  Encumbrance on property Condominiums & Co-operatives: - Condos  Allows for a combination of individual & joint ownership o Governed by condo association - Co-operative  Property owned in common/corporation with shareholders Landlord/Tenant Relationship - Leaseholds Estates: o Landlord retains reversionary interest in property o Lessee is entitled to exclusive possession during term of the lease o Contract law applies, lease must be evidenced in writing o Leasehold interests run with the land - Governed By:  Rental agreement / lease  Residential Tenancies Act (repair/privacy/amount/termination) Types of Tenancies: - Term Lease  Stipulated to run for a specific period of time - Sublet  Original tenant has right to retake possession - Periodic Tenancy  Period-to-period rental
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