february 12, 2014business law (ms. hawkins)1 chapter 21: employment contracts chapter 21 presents a...

April 10, 2023 BUSINESS LAW (Ms. Hawkins) 1

CHAPTER 21: EMPLOYMENT CHAPTER 21: EMPLOYMENT CONTRACTSCONTRACTS

Chapter 21 presents a survey of employment law:

► Creation and termination of employment contracts

► The basic duties of employers and employees

► Potential liability of an employee and employer for termination of an employment contract



Hot Debate (Page 402)Hot Debate (Page 402)

Brenda was 14 years old. Her next door neighbor, Bob, owned a small logging company and offered Brenda a job as a ‘saw mechanic.” this job involved cleaning, tuning, sharpening, and testing chain saws. Testing involved cutting a thick log while wearing gloves and safety goggles. The job paid $14.00 per hour, a rate very attractive to Brenda. When Brenda told her dad about the opportunity, he said he thought the job was too dangerous for someone her age. She said she thought he was just being sexist.



Hot Debate (Page 402)…Hot Debate (Page 402)…

► Do you agree with Brenda or her father about the job being too dangerous for someone Brenda’s age?A child 14 doesn’t have the necessary judgment.A child 14 doesn’t have the necessary judgment.

► Should Brenda, her father, Bob or someone else decide whether Brenda can take this job or not?Brenda's father is in the best position to decide what Brenda's father is in the best position to decide what employment is proper for his minor child.employment is proper for his minor child.



What is Employment?What is Employment?

Employment exists when:

1. An employer contracts to pay an employee to do work

2. The work is done under the employer’s supervision and control.



What’s Your Verdict (Page 403)What’s Your Verdict (Page 403)

Phil and his teenage daughter Elaine trimmed the branches from a large dead tree in front of their house. They also dug around the base and cut through most of the roots. Then they tried to pull the main trunk out of the ground with a long, heavy ripe. Seeing them struggle, their neighbor Steve came out and helped.



What’s Your Verdict (Page 403)…What’s Your Verdict (Page 403)…

► Is Elaine an employee of Phil?

No. Elaine was helping with a family chore.No. Elaine was helping with a family chore.

► Is Steve an employee of Phil?

No. Steve was being a good neighbor. There was no No. Steve was being a good neighbor. There was no contract for pay.contract for pay.



What is Employment?What is Employment?

Independent ContractorIndependent Contractor

► An independent contractor agrees to produce a finished job without being supervised.

► An employee agrees to do a range of tasks under the direction and control of the employer.



Terms of the Employment ContractTerms of the Employment Contract

Terms can be derived from:

► Express agreements between the employer and employee

► Implied agreements between the employee and employer

► State and federal laws



Express AgreementsExpress Agreements

► Express employment contracts can be written or oral.

► Employees who have detailed written employment contracts: sports professionals, entertainers, top-level managers, union members

► Most contracts are partly written and partly oral.

► Terms usually included: work hours, compensation, fringe benefits, time required for advance notice of compensation



Implied AgreementsImplied Agreements

► Employment terms that are not expressed orally or in writing may constitute an implied agreement.

► Implied agreements consider custom or trade practice (e.g. a length of employment may not be specified).

► Employment at WillEmployment at Will means an employee can be discharged at any time because there has been no agreement about the length of employment; it also means the employee may quit without being liable for breach of contract.



Terms Imposed by LawTerms Imposed by Law

► State and federal laws provide many important terms for each employment contract.

► Minimum wageMinimum wage is an example.



What’s Your Verdict? (Page 403)What’s Your Verdict? (Page 403)

Sid applied for a part-time job as a cook in a Mexican restaurant. Sid and the manager, Leslie, discussed hours and agreed that Sid would work from 3 p.m. to 5:30 p.m. on Mondays, Wednesdays, and Fridays. Sid was given a company personnel manual that described the pay scale and fringe benefits. It showed that he would be paid $6 per hour. In addition, Leslie told Sid how she wanted the food cooked.



What’s Your Verdict? (Page 403)…What’s Your Verdict? (Page 403)…

What are all the terms of this employment contract?

►► Work hours (oral and express)Work hours (oral and express)

►► Hourly rate and fringe benefits (written and express per Hourly rate and fringe benefits (written and express per personnel manual)personnel manual)

►► Hourly rate (implied if minimum wage) Hourly rate (implied if minimum wage)



State Minimum WageState Minimum Wage (http://www.laborlawcenter.com/t-State-Minimum-Wage-Rates.aspx): As of (http://www.laborlawcenter.com/t-State-Minimum-Wage-Rates.aspx): As of 03/23/1103/23/11

STATE MIN. WAGE

California $8.00

Washington $8.67

Minnesota $6.15

Georgia (6 or more employees) $5.15

Kansas $7.25

District of Colombia $8.25

Hawaii $7.25



Federal Minimum Wage—Did You Know?Federal Minimum Wage—Did You Know?

► The current federal minimum wage is $7.25/hour (2010)$7.25/hour (2010).► The minimum wage law (the FLSA) applies to employees

of enterprises that do at least $500,000 in business a year. It also applies to employees of smaller firms if the employees are engaged in interstate commerce or in the production of goods for commerce.

► It also applies to employees of federal, state or local government agencies, hospitals and schools, and it generally applies to domestic workers.

4/28/06 (4/28/06 (http://usgovinfo.about.com/blminimumwage.htmhttp://usgovinfo.about.com/blminimumwage.htm))



Federal Minimum Wage…Did You Know?Federal Minimum Wage…Did You Know?

► In cases where state rates differ with the federal rate, the higher wage rate always applies.

► If you are under 20 years of age, you may be paid as little as $4.25 per hour during your first 90 consecutive calendar days of employment.

►If your tips plus cash wages do not equal at least $5.15 per hour, your employer must make up the difference



Child Labor—Did You Know?Child Labor—Did You Know?

► You must be at least 18 to work in non-farm jobs declared hazardous by the Secretary of Labor.

► Persons 14 and 15 years old are allowed to work before or after school: 3 hours (school day), 18 hours (school week), 8 hours (non-school day), 40 hours (non-school week)

Work may not begin before 7 a.m. or end after 7 p.m., except from June 1 through Labor Day, when evening hours are extended to 9 p.m.

http://usgovinfo.about.com/bllabor.htm



A Question of Ethics? (Page 404)A Question of Ethics? (Page 404)

Suppose you were hired under a contract for three years as a research scientist. After six months on the job, a competing firm offers you twice the pay. You can breach your current contract, pay damages, and still come out ahead financially.

► Will you break your contract and your promise?

► What reasons support your decision?



Employee DutiesEmployee Duties

► An employee has a duty to fulfill the agreements made with the employer.

► An employee has duties created by state case law.1. Obedience2. Reasonable Skill3. Loyalty and Honesty4. Reasonable Performance




► Obedience

The employee has a duty to obey the reasonable orders and rules of the employer.

This does not require express agreement on the part of the employee.




► Reasonable Skill

This requires that those who accept work possess the skill, experience, or knowledge necessary to do it.

Absent reasonable skill, the employer need not keep you or pay damages for discharging you.




► Loyalty and Honesty

An employee is obligated to look out for the best interest of the employer.

An employee may be discharged for committing fraud upon the employer or by revealing confidential information about the company.




► Reasonable Performance

An employer can discharge an employee who fails to perform assigned duties at the prescribed time and in the prescribed manner.

Occasional minor failure to perform is not sufficient grounds for dismissal.



What’s Your Verdict? (Page 405)What’s Your Verdict? (Page 405)

Vito hires Winston as a welder for a three-year period. Vito requires all welders to wear protective helmets and goggles while working. Winston, who has long hair that makes it difficult to wear he helmet, refuses to do so.



What’s Your Verdict? (Page 405)…What’s Your Verdict? (Page 405)…

Can Vito discharge Winston without liability?

► Yes. The rule that Winston disobeyed was reasonable, so Winston is guilty of disobedience.

► However, employees cannot be required to act illegally, immorally, or contrary to public policy.



What Georgia Employers Need to Know...What Georgia Employers Need to Know...((http://www.sos.ga.gov/firststop/georgia_employers.htm))

► No minor under 12 can be employed► The Age Discrimination in Employment Act prohibits discrimination

against workers who are 40 years of age or older.► There is currently no Federal or Georgia law prohibiting discrimination

against employees based on their sexual orientation.► Georgia recognizes the doctrine of employment at will. Employment at

will means that in the absence of a written contract of employment for a defined duration, an employer can terminate an employee for good cause, bad cause or no cause at all, so long as it is not an illegal cause.

http://www.sos.ga.gov/firststop/georgia_employers.htm



Employer’s Duties to EmployeesEmployer’s Duties to Employees

► Some employer duties arise out of express terms agreed upon by the parties.

► Other employer duties are created by law:1. Reasonable Treatment2. Safe Working Conditions3. Fair Labor Standards4. Payroll Deductions5. Duties to Minors6. Military Service and Voting




► Reasonable Treatment

Employees suffering assault and battery may quit without liability.

Injured employees may sue for damages.




► Safe Working Conditions

Safe conditions include tools, equipment, machinery, and the building.

Employees’ health, safety, morals, or reputation must not be harmed.

Harmed employees may quit w/o breach of contract.




► Fair Labor Standards

The Fair Labor Standards Act establishes a minimum wage and maximum hours for employees.

The act does not cover executives, administrators, and professional workers.




► Payroll Deductions

The employer is legally obligated to withhold a percentage of the employee’s paycheck to cover employee federal and state income tax obligations.

Some withholding go to FICAFICA (Federal Insurance Contributions Act, a.k.a. Social Security tax)

The employer pays into a Worker’s CompensationWorker’s Compensation fund which compensates employees for injuries on the job.




► Duties to Minors (State Laws)

Both the federal government and state governments have labor laws protecting minors.

When state child-labor laws have stricter standards than federal laws, the state laws rule.

States provide for limits on age, type of work, and work hours, and require work permits.




► Duties to Minors (Federal Law)

The Fair Labor Standards ActThe Fair Labor Standards Act makes it illegal for people under fourteen years old to work, except in:■ entertainment ■ agriculture■ work for parents (non-manufacturing)■ agricultural jobs after school■ delivering newspapers




► Military Service and Voting

TheThe MilitaryMilitary Selective Service Extension ActSelective Service Extension Act (1950) requires that certain military persons be re-employed by their former employer after honorable discharge from the service.

More than one-half the states provide that workers must be given sufficient time off with pay to vote in regular primary and general elections.



Employer’s Duty to those Injured by EmployeesEmployer’s Duty to those Injured by Employees

► If an employee, acting within the scope of employment, commits a tort (injures persons or property), the employer is liable for the damages.

► If the person is an independent contractor rather than an employee, the person who hired the contractor is not liable for the contractor’s torts.



Types of Employment ContractsTypes of Employment Contracts

► Employment Contracts Terminable at Will

► Employment Contracts for a Specific Length of Time

► Employment Contracts with Governments




► Employment Contracts Terminable at Will These contracts are terminable at will because they do not

specify a length of time for the employment relationship. Termination without clause does NOT include wrongful wrongful

dischargedischarge: race, religion, gender, age, handicap, pregnancy, veteran status, or national origin—this is illegal job discrimination.

Also included under wrongful discharge: retaliation against worker’s comp filers, whistle blowers, and those who refuse to commit perjury.




► Employment Contracts for a Specific Length of Time

This type of contract is breached if one party terminates early. Fulton County teachers terminating before the contract has lapsed must pay a $500 fee.

Sports contracts are a good example.

Teachers are another example.




► Employment Contracts with Governments

In general, public employees (those who work for a government) are entitled to due process (a reason and a hearing) before being discharged.



The Right to Unemployment CompensationThe Right to Unemployment Compensation

► Workers who are terminated despite having complied with all the terms of their employment contract are said to have been discharged without causedischarged without cause.

They are entitled to unemployment compensation. Unemployment compensations is money paid by the

government in cooperation with states under the Social Security Act of 1935, to workers who have lost their jobs.

UC is not available if you quit, strike, or refuse to accept similar substitute work.



Georgia Unemployment CompensationGeorgia Unemployment Compensation

► Georgia Unemployment Rate: 10.2% ► National Unemployment Rate: 8.9% They are entitled to unemployment compensation. Unemployment compensations is money paid by the

government in cooperation with states under the Social Security Act of 1935, to workers who have lost their jobs.

The funding for unemployment benefits comes from taxes paid by employers; workers in this state do not pay any of the cost.