University of Florida Business Law Starbucks Case Study

You manage a Starbucks. All your employees are part time workers. One of them, we will call him X, is very active on social media and posts about the store and what is going on there- this is attracting business. Your regional manager has even complimented you on the volume of business you have been doing recently. Another employee has come to you to complain that X is always taking her picture and posting it and that she feels like he is ‘picking on her’.

1. Identify the issues that you see here.
2. What are the laws that apply to those issues?
3. Based on those laws how would you handle this situation.

Use class material. Give an organized response. Should be about three pages, no longer.

How to end an
agency
Agency III
Termination
Termination
• Depends on how and why you formed it.
• Generally ends:
• When the purpose has been met.
• When the agreed upon term is over.
• But you may want it to be an ongoing relationship. Should be clearly
spelled out because so long as there is any agency A can create
liability for P.
Termination
• By term: time can be agreed upon either verbally or in writing, e.g. I
will list my house with you for three months,
• By task: when the job is done, e.g. I will list my house with you till it
sells,
• By death of P or A.
• Problem areas: lingering authority and employees at will
Lingering Authority
• Termination may not be known to third parties so apparent authority
lingers
• If it is reasonable for third parties to rely on the authority of the
agent, then the agency will continue, to avoid harm to third parties
• P should inform everyone once agency is terminated
-Most common employment status in US
At will
employee
-No contract; hired as employee. Subject to
policies of the company.
-Can be fired or can leave at anytime as
long as law is followed.
-We will look at employment law in greater
detail later on but worth some time here to
talk about termination of at will agents.
Termination of at will
• Since there is no contract, we look to the following for guidance:
• Policy manuals: if any
• Any policies or guidelines: if any
• Past conduct: pattern and practice of behavior ( how have you terminated
others in the past)
Termination of at will
• Critically important to comply with your policies and guidelines, they
create expectations.
• If you vary you may be open to a discrimination claim.
• Review your past terminations and make sure you have been
consistent.
Termination of at will
• Other factors that can come into
play:
• State laws:
• Public Policy exception in SC: you cannot
terminate someone if it violates public
policy. How do we define public policy?
• Federal laws
• Title VII of the Civil Rights Act of 1964
• whistleblower protection for employees
who report illegal conduct to the
government
Termination happens by
agreement, task completion or
death of P or A.
Summary
Beware lingering authority.
At will agents (common employee
relationship in the US) most
difficult to terminate cleanly due to
policies and laws.
Agency II
• Scope of Agency: Rights and
responsibilities of each
Agent’s Responsibilities
-Loyalty: can’t represent both sides without
disclosure, can be required to comply with noncompete agreements* (will be enforced if
reasonable) and confidentiality clauses.
– Duty of Obedience: instructions must be
followed if reasonable.
– Duty of care: act w/o negligence
– Duty to provide an accounting
– *see next slide for ‘extra extra’
Extra Extra
• Contract clauses that bind an Agent:
– Confidentiality Agreement, Non-disclosure
agreement (NDA)
• Protects privacy: cannot disclose what they have
learned, enforced if it does not violate public policy
– Non compete Clause:
• cannot go into the same line of work, cannot work
for competitors, enforced if reasonable.
Principal’s Responsibilities
• Duty to compensate Agent unless A is a
volunteer
• Duty to give reasonable clear instructions
• Duty to act w/o negligence*
• *reasonable standard of care
What A can ask for
• Compensation
• Reimbursement
• Indemnification
• Safe work environment
• Accounting
• Contract and tort remedies.
What P can ask for
• Contract and tort remedies: whatever is in
the agreement and civil wrongs (torts)
done by A
• Constructive trust: trace funds/proceeds
• Indemnification: if P is sued by third party
can proceed against A if A caused liability.
Liability
• When can A create liability for P?
– TORTS
• Scope of employment. Scope of task
– CONTRACTS
• When authorized
– CRIMINAL
• Injury to reputation
Torts
• When A commits a tort P can be sued for
it if the tort is committed during the scope
of employment. Applies to negligence
always but can apply to intentional torts if
P knew A had issues.
• While doing the task defined by P
– Detours
– To and from work
Torts
• Intentional torts are not generally
considered to be in the scope of
employment:
– Knowledge of P, notice of prior bad acts
• Since principal can be held liable, principal
has the right to substance test agent if job
related to reduce potential harm to others
Torts
• Principal is generally not responsible for
torts not in the scope of employment
unless:
– asking the agent to do inherently dangerous
work (demolition) or
– P negligently hires A (P should have known
agent had a problem) or
– P negligently instructs A (P gives bad orders).
Contracts
• Legally enforceable agreements
• A is often authorized to do this by P
• A can only enter into contracts or
agreements that A is authorized to do
– Apparent and implied authority issues can
muddy the waters here
Contracts
• Disclosed principal: if third party deals with
agent and knows who the principal is, then
everything that agent agrees to with the
third party can bind the principal.
– If that agent has no authority to agree to
anything then the agent is liable to the third
party not the principal.
Contracts
• Undisclosed principal: agent is responsible
until the third party finds out who the
principal is.
• Who is at risk here?
• Why would you have an undisclosed
principal?
Criminal Conduct
-P generally not liable unless directs it
or is a co conspirator.
-Crimes require individual intent so
perpetrator will be punished.
-Harm to reputation
Summary
• A must be loyal and obedient
• P must pay and give reasonable direction
• Scope of employment makes P liable
• A’s authority key in contracts
• Criminal acts are personal
Agency I
What is it?
Principal hires agent to do a task.
Agency
Relationship
Agent acts on behalf of principal,
with direction.
Agent has the
capacity to bind
principal.
Can commit to
an obligation
Can create
liability: problem
area
Agency
relationships
Employer…employee
Athlete…… agent
Buyer………….realtor
Food bank……volunteer
Not all agents are employees,
they can be independent
contractors. Some obligations
will differ based on what kind
of agent you are dealing with.
Agency Relationships
• Direction, consent and control.
• P directs and controls what A does and A consents to be directed and
controlled.
• Does not require payment, agent can be a volunteer
• A volunteer can still create liability for P
• Most common agent relationship is employee and independent
contractor
• They are different and we look to IRS test
Employee
• IRS test: Under common-law
rules, anyone who performs
services for you is your employee
if you can control what will be
done and how it will be done.
https://www.irs.gov/businesses/
small-businesses-selfemployed/employee-commonlaw-employee
Independent
Contractor
• IRS test: The general rule is that an
individual is an independent
contractor if the principal has the
right to control or direct only the
result of the work and not what will
be done and how it will be done.
https://www.irs.gov/businesses/small
-businesses-selfemployed/independent-contractordefined
Why important to distinguish?
• Because law imposes many more obligations on you as a manager of
employees:
• Social security
• Minimum wage
• Discrimination protection
• Many more that we will look at during this course.
Fiduciary relationship: trust and loyalty
Highest legal relationship
Nature of the
Relationship
Can have no conflicts of interest
Act for the other in their best interests not
in your own
How to create agency
• By Agreement: express, verbal or written
• By Ratification: up to Principal
• Estoppel*: based on conduct, imposed by law
• Implied: imposed by law based on what agent should be allowed to
do.
• * cannot deny it in court
Express authority: Jerry McGuire is my
agent and you will negotiate with him.
Agreement
Can be verbal or written. If agent is going
to enter into contracts that need to be in
writing, then the agency agreement should
be in writing.
Capacity to contract is required for agents
if they will be executing contracts.
Ratification
Principal can ratify (adopt) an
agreement that agent negotiated
without authority, i.e. Principal can
cure agent’s lack of authority or can
reject the agreement.
If principal does this enough times
a pattern may be established that
agent is authorized beyond his
scope. Beware…
Implied authority: once given express
authority get all the things that go
with it. A manager with authority to
buy supplies must also have authority
to pay for them.
Estoppel/Implied
By Estoppel: looks like you have
authority, apparent authority, third
parties rely on that apparent authority,
principal will be denied from claiming
that you are not an agent.
Agency is about direction and control.
It is a fiduciary relationship.
Summary
Important distinction: employee and independent
contractor.
Volunteer agents (unpaid) can still create liability
for you.
Formed by agreement, ratification or imposed by
law (estoppel and implied.)
Employment
The Basic Laws
Generally
• Agency relationship: employer is the principal
• At will: no contract
• Derived from master-servant common law:
respondeat superior (one in charge is liable)
• Law will vary state to state yet federal law is
the most applicable due to commerce clause
Federal law minimums
• Federal statutes set the minimum:
– Fair Labor Standards Act
– Social Security
– Unemployment
– Family Medical Leave Act
– Workers Compensation
– Occupational Safety& Health Act
– Immigration Reform & Control Act
FLSA
• Federal law that sets the minimum
employment standards:
– Minimum wage: states can pass higher
– No child labor: exceptions for farms, family bus.
– Work week: overtime pay for hourly workers;
managers exempt
• Applies to all employees not to independent
contractors
Social Security Act
• Mandatory contribution and withholding for
employees: employer matches.
• Does not apply to independent contractors
• Fund pays out:
– Retirement: beginning from age of 62
– Disability: wage replacement because you cannot
work
– Survivor’s benefits: minor children and
dependents
Employee v. Independent Contractor
Criteria that sets them apart
Employee
Independent Contractor
Salary or hourly wage
Payment when job is done
Direct supervision by employer
Sets own time and place to work
Employer controls how you do the work
Does the work in their own manner
Control by employer (IRS test)
Little to no control by principal (employer)
Unemployment
• Mandatory contributions from employer
• Wage replacement in the event of no fault
termination
• Fed collects money then disperses to States
who make payments based on their criteria,
e.g. length of your service
• Federal gov’t can extend benefits
• Does not apply to independent contractors
FMLA
• Family Medical Leave Act
– Employers with 50 employees or more must give
12 unpaid weeks for a family medical issue.
– Examples are birth or adoption of child,
immediate family member or you need care.
– Return to a similar job.
– Maintain your health insurance if they are
providing it during that time.
Worker’s Compensation
• Insurance plan purchased by employer to
cover workplace injuries
• Mandatory in all states
• Limits employer liability to the insurance
payout: employee cannot sue in court unless
gross negligence on the part of the employer
• Even if you have one employee you must have
coverage
OSHA
• Obligation to maintain a safe workplace
• Must report accidents and deaths
• OSHA can inspect, investigate and fine
• Employer must do safety training if needed
• SC has a state OSHA and they work together
IRCA
• Immigration Act passed in 1986 which
requires employer to complete an I-9 form on
every hire.
• The form requires multiple forms of ID and
proof that the employee can legally work in
the US.
• Need correct visa classification to work if not a
citizen or green card holder
What is a visa?
Visas are the government’s permission for you
to be in their country if you are not a citizen.
• No treaty: apply for permission, get a visa
• Treaties: can allow for free travel
• Visas have different purposes: travel (B),
work(H,L), study(J), invest(E)
H-B 1
• Important visa category for managers
• Applies to skilled workers not available in the
US, there is an under supply
• Over 250,000 are authorized each year by
Congress
• Companies have to sponsor you
• Apple and Microsoft have large numbers of HB1 employees
Summary
• Laws listed above apply to employees not to
independent contractors
• They create the basic employment framework
in the US that all managers should be aware
of. Managers work with human resources.
• Key distinction between employee and an
independent contractor-see next slide for
table.
Employment III
State law, Labor and Employee Issues
State Laws
• Most states have their own employment laws: states can give more
than federal govt but not less. Issue is does federal law apply to you?
• Number of employees is the trigger
• California is an example of a state with more liberal laws for
employees while South Carolina is :
• At will= No contract needed.
• Right to work = Do not need to be a union member to work in industry.
• A state that imposes public policy limit on employer’s actions.
Compliance
• Employer must comply with both federal and state laws if applicable.
• If federal laws apply (number of employees). FLSA always to employees
• In the state where the employee is located (jurisdiction)
• With larger employers this can make employment law and human
resources a large part of the administration of the company.
• To save costs some firms go to low protection states or offshore
• Employee may bring suit based on federal or state law or both.
National Labor Relations Act
• Federal law that allows employees to form unions and collectively
bargain for employment contracts
• Enforced by National Labor Relations Board (NLRB)
• Employees must vote to form a union
• NLRB certifies the union
• Union representative negotiates with management for a collective
contract, one contract on behalf of all employees
• https://www.nlrb.gov/about-nlrb/rights-we-protect/whats-law
NLRA
• Applies to private sector: government has its own employee union
• Right to work states: you do not have to be in the union to get a job
• Law protects you in forming a union and from not participating
• Even if not in a union, as an employee you can engage in ‘protected
concerted action’ with your fellow employees. Especially on social
media, can create facebook pages of how to make work better.
• Examples of unions: truck drivers, teachers, professional sports,
airline pilots, service workers, stage workers…..
NLRA
• Potential problems for managers:
• Have to let workers discuss unions
• Cannot punish a union organizer
• How does this happen in the workplace?
• ‘protected concerted activity’: when does it cross the line into something you
can fire an employee for? See next slides on free speech.
Privacy and Free Speech: Gray Areas
• Privacy: what are our expectations of privacy?
• Constitutional, Statutory and Tort Protections.
• Constitutional are enforceable against the government. Search and seizure 4th
Amend. Not applicable to a private employer.
• Statutory: Health records, customer identity info
• Tort: civil wrong of invading privacy, sharing private information, e.g.
personnel records
What can employer do?
• Matters if employer is the government or private.
• Civil liberty protections exist against the government but not against a private employer.
• Private employer can drug test,
• Can search your locker or bag,
• Can search/monitor the data you produce on an employer provided device or
if using their server*.
• Can view your social media posts and can fire you for them. Gray area but be
warned. Cases on both sides.
* Data ownership and creation is worth some discussion: see next slide.
Data Issues
• Not enough law on who owns data and who is responsible for it.
• First question: what is data?
• Observations. Trace a credit card receipt. How many observations?
• What is the current law on data?
• Cannot collect personal identifiers if you don’t need them. If you do, you must
protect them through encryption, firewalls etc…
• GDPR and the California Code afford most protection for consumers’ data.
• What should I do as a manager?
• Keep data confidential, keep as little as you need and report a hack to your
supervisor asap.
GDPR=General Directive on Data Protection
• Adopted by the EU in 2018 to give consumers control and protection
over their personal data on the internet.
• Requires that consumers be notified within 24 hours of a hack.
• Allows consumers to refuse to allow their data to be shared.
• Allows consumers to know what data an ISP has on them.
• Allows consumers the right to be forgotten
• Applies within the EU and to those dealing with EU citizens and
companies.
• California has adopted a state code which is very similar.
Summary
• States can have different employment laws that an employer may
have to follow.
• Federal law allows for the creation of unions.
• Employees have free speech and privacy against the government not
against their private employer, so free speech and privacy are not
clear cut in the workplace.
Business Ethics and Social
Responsibility
Ethics
• Definition: Moral principles and values
applied to social behavior.
• How we “should” act when no one is
watching.
• Sustainability pillars: strategy, law and
ethics.
• Business Ethics: how we balance profit
with values.
Values
• Can we define these?
– Obey the law
– More than that?
– Do the right thing?
– Anticipate problems and avoid them?
– Help people stay safe, healthy?
– Clean up your messes?
– Personal?
Ethics
• Law as the moral minimum: Do not go to
jail for being unethical, go to jail when it
becomes a crime
• Law can be the standard for business
ethics. High or low standard?
• Should business do more? (your values)
• How can business do more?
Ethical Theories
• Outcome Based: (guided by impact)
– Utilitarianism: greatest good for greatest
number
– Cost benefit: do costs outweigh benefits.
Should benefits be only money?
– Stakeholder theory: identify stakeholders and
assess impact on them
Ethical Theories
• Duty based: (just follow)
– Religion
– Kantian philosophy: categorical imperative:if
we all do it what are the consequences so
what is my duty to all.
– Moral values
Corporate Social Responsibility
• Theory adopted that corporations should
be responsible corporate citizens.
• What makes a good citizen?
– Pay taxes
– Clean up your messes
– Help your community
Stakeholder Theory
• Identify your stakeholders then analyze
how each will be impacted by your
business decision and apportion impact.
• Stakeholders are those impacted by our
decisions: primary(directly impacted) and
secondary(indirectly impacted)
• E.g. Who are facebook’s stakeholders and
how would they be impacted if facebook
decided to start charging its users.
How do we encourage ethical
behavior in the workplace
• Management behavior: sets a tone.
Incentive systems matter.
• Codes of Conduct: set expectations.
• Training in ethics: mandatory employee
training
• Owners v. Managers: different ethical
standards as a problem.
Steps in Decision Making
• Define the dilemma
• Identify impact
• Apply your standards
• Discuss with stakeholders
• Implement, monitor and evaluate
• All along the way your actions must be
lawful.
Public Corp
• Public companies (traded on exchanges)
have ethical obligations imposed by law.
• Sarbanes Oxley: requires that the
company have an anonymous reporting
system for claims of unethical conduct.
• Why do you think this is important?
Professional Code
• Lawyers
• Chefs
• CPA’s
• Realtors
• Doctors
• Self-regulation: agree to be bound due to
membership
Global Ethics
• Which rule do I follow?
• What if I can pollute in a foreign country,
its legal, should I?
• Methods to stop this through public watch
groups and treaties
• Foreign Corrupt Practices Act: US law that
prohibits companies from bribing govts to
get business.
Law for Business Managers
Who is a business manager?
• Person who is responsible for controlling or administering all or part
of the activities of a business
• Can manage a firm or a natural person: artists, actors, sports figures
• Can own the business
• Generally has employees working for them, is ‘the boss’
• Mid-level, regional, national: can have their own ‘boss’
Responsible for….
Responsible for = liability under the law
Liability is the legal term for being held responsible for your actions, i.e.
you can get sued.
But we can also add moral or social or ethical responsibility, generally
you cannot be sued for this.
This course will look at how you can manage while recognizing the
potential liability, finding ways to minimize it and knowing when to call
in help, e.g. attorneys or human resources.
Areas of law we will focus on
• Agency: basic rules of who controls and who follows orders and how they
can create liability for each other through torts and contracts. The boss
relationship.
• Employment: who are employees, what are the duties owed to them,
protections, rights, potential liability through torts and contracts. Federal
and state laws that govern how they are to be treated in the workplace,
e.g. termination, discrimination, benefits etc…The rules of being a boss.
• Ethics: how to do more than comply with the law. How to be a better boss.