Regulating of Employment and Bankruptcy at Wilkins Wacky Widget Company - Case Study Example

Business Law Answers to Questions PART ONE: AGENCY You’ve been working at Wilkins Wacky Widget Company for five years.  You’ve put in these years of faithful service and are about to get the big break you know you deserve.  The president of the company decided that he had enough of the 9-5 world, and took off without giving notice to spend summers hang gliding in Europe.  (The cliffs of Dover are superb in the summer).  The board of directors was stunned.  They held an emergency meeting to elect a new president, and low and behold, it’s YOU.  So now YOU are the president of the Wilkins Wacky Widget Company.  As you spin around in your big fancy leather office chair and throw pencils into the tiles of the ceiling, you decide you better get started.  Your first order of business is to hire a new salesman to sell your widgets. 1.    You just hired John to sell widgets for your company.  You are trying to decide whether or not you have established an agency relationship with him.   a.    What five things must exist in order for an agency relationship to have been established? ANSWER: The five (5) things that must exist in order for an agency relationship to have been established are: i. The presence of control the employer (manager or supervisor) has over their employee or worker should exist. Generally, in an employer-employee relationship, the employer controls, directly or indirectly, the way the work is done and the work methods used. The employer assigns specific tasks that define the real framework within which the work is to be done. The payer exercises control if he has the right to hire or fire, and decide where, when and how the work will be done. If such is the case, then the hirer clearly exercises control over the worker, who may then be considered to be an employee for EHT purposes. It is not necessary that the control be exercised, only that it can be exercised. Control in itself is not always conclusive. ii. Chance of profit should exist. If it is determined that an employer-employee relationship exists between a salesperson and an agency, the latter is required to remit EHT on remuneration paid to the salesperson. Iii. The ownership of the tools must also exist. In this, the main points to consider are the amount invested, the rental and maintenance of equipment and tools and the value of equipment and tools. In an employer-employee relationship, the employer generally supplies the equipment and tools required by the employee. The employer also covers the following costs related to their use: repairs, insurance, transport, rental, and operation. iv. If an employer-employee relationship exists, the employer alone assumes the risk of loss. The employer also generally covers operating costs, which may include office expenses, employee wages and benefits, insurance premiums, and delivery and shipping costs. The employee assumes little or no financial risk and is entitled to his/her full salary or wages regardless of the financial health of the business. v. Integration should be present to show that service is being provided by the worker as performed as an integral part of the business, or done on behalf of the business but not integrated into that business. Under a contract of service, a man is employed as part of the business, and his work is done as an integral part of the business. However, under a contract for services, the employee’s work, although done for the business, is not integrated into it but is only accessory to it. Where the salesperson integrates his/her activities with the commercial activities of the payer, an employer-employee relationship probably exists. The worker is acting on behalf of the employer, he/she is connected with the employer's business and is dependent on it. 2.    It appears that John meets all of the requirements you set forth above.  While John is out selling widgets for you, he starts selling iPods on the side for another company.  You find out about it and want to have a serious meeting with John. a.    What will you discuss in your serious meeting with John? ANSWER: I will discuss in a serious meeting with John that it is improper that while he (John) is out selling widgets for our company, he starts selling iPods on the side for another company. This is unethical and illegal for an employee with an existing job to do. 3.    John quits as a result of your serious meeting.  You later learn he went on to establish his OWN widget company.  You call your lawyer and start yelling before he can even say hello!  You are obviously angry that John started his own widget company and you want your lawyer to make him stop immediately!  a.    What will your lawyer tell you? ANSWER: The lawyer will get offended for being yelled at before even saying hello. The lawyer will tell me that after resignation, John cannot be stopped for putting up his own widget company since there is no legal agreement between John and the agency stating that John cannot put up his own company of the same nature. 4.    It’s 4am.  You wake up in a sweat, suddenly remembering that John had confidential information about YOUR company when he left! a.    Will John ever be allowed to disclose that information?  ANSWER: John will never be allowed to disclose confidential information. b.    Why or why not? This is because it is stipulated in the agency’s written policy to remain competitive in the widget manufacturing and marketing business, the agency must protect its confidential and proprietary information. PART TWO: EMPLOYMENT LAW 5.    After your problems with John, you find you are much more comfortable working with employees rather than agents.  However, you aren’t willing to draft employment contracts with all of your employees.  a.    What kind of employee relationship are you creating when there is no employment contract? ANSWER: The kind of employee relationship that is being created when there is no employment contract is an employment-at-will. This means that the employee has no contract that restricts the employers ability to terminate this employee. Both the employer and the employee are entitled to end the relationship at any time. However, an at will employment policy does not give the employer carte blanche to terminate employees for any reason. Specific legal guidelines govern the rights and responsibilities of both parties in an at-will situation. 6.    You are having some trouble with pollution coming from your Widget plant.  You know the inspectors are coming this week and you tell your plant supervisor to “take care of it”.  Your plant supervisor “takes care of it” by ordering one of your employees, Albert Einstein, to falsify your company records to show acceptable levels of pollution.  Falsifying company records is against the law. Mr. Einstein refuses to falsify the records, and your plant supervisor fires him.  Mr. Einstein files suit for wrongful discharge.  He was clearly an employee at will.  a.    Does Mr. Einstein have a wrongful discharge claim?  ANSWER: Yes, Mr. Eistein have a wrongful discharge claim. b.    Why or why not? ANSWER: This is because employers are not entitled to terminate employees for refusal to participate in illegal activities, like in this case falsifying the company records to show acceptable levels of pollution. If the employee can prove that termination followed such a refusal, he or she may be entitled to recover damages for wrongful discharge. c.    If Mr. Einstein has a wrongful discharge claim, what category of claim does he have? (hint: there are three categories of wrongful discharge claims) ANSWER: If Mr. Einstein has a wrongful discharge claim, the category of claim that he has is that for “refusing to perform an illegal act or an act contrary to a strong mandate of public policy“. 7.    You receive word from your attorney about one of your current employees, Emily Jones.  She is planning to pursue a lawsuit against you.  Her claim is that you entered into discussions with her at her interview and promised her she would get a 10% salary increase after 180 days.  This wasn’t reduced to writing, but she claims you DID make this promise (you did).  More than 180 days have passed, and she wants you to make good on this promise.  a.    Will your promise be found enforceable?  ANSWER: Yes, the my promise will be found enforceable. b.    Why or why not? ANSWER: This is because the law states that even an oral promise can be enforced at the agreed on or before the date. Failure to comply with agreements would violate employees' rights. 8.    You want Ms. Jones to take a lie detector test regarding the conversations she said took place at her interview.  a.    Can you require that she do so?  ANSWER : No, Ms. Jones cannot be forced to take a lie detector test regarding the conversations she said took place at her interview. b.    Why or why not? ANSWER: This is because despite the claims of lie detector examiners, there is no machine that can detect lies with any degree of accuracy. The lie detector machine does not measure truth-telling; it measures changes in blood pressure, breath rate and perspiration rate, but those physiological changes can be triggered by a wide range of emotions such as anger, sadness, embarrassment and fear. In addition, a variety of medical conditions such as colds, headaches and neurological and muscular problems can distort the results as an American Medical Association expert testified during public hearings before Congress. "the [lie detector] cannot detect lies much better than a coin toss." PART THREE: BANKRUPTCY 9.    You have been having trouble with a Wilkins Silly Widgets, a small subsidiary of your widget company, and far less wacky.  It hasn’t been making a profit in over two years and you need more cash to turn it around.  You cannot move forward in your current state and you need time to get things back on track.  You decide to file for bankruptcy.  a.    What chapter would you file under? ANSWER: The chapter that I would file is under Chapter 11. b.    Why? ANSWER: This is because Chapter 11 is the chapter of the Bankruptcy Code that permits reorganization under the bankruptcy laws. Chapter 11 of the bankruptcy code can be filed by any business, whether organized as a sole proprietor, partnership, corporation or as individual. And now we leave your Wacky Widget Company behind, Silly Widgets and all.  The final question on this exam asks you to BE a lawyer.  Please assume that you ARE a lawyer and capable of giving advice.  Answers that indicate ‘a lawyer should be hired’, etc. will not receive credit. 10.    A 23-year-old student comes to your office for advice.  He tells you he’s in financial trouble and needs to get “bailed out”.  He has $25,000 in credit card debt, $110,000 in student loans, $3,500 to the IRS in back taxes, and a $45,000 car loan.  He is a full time student and has no income.  a.    What chapter would you advise he file under? ANSWER: Assuming that I am a lawyer and capable of giving advice, I would advise the student to file Chapter 11.  b.    Why? ANSWER: This is because Chapter 11 also applies for individuals who wish to clean slate with their financial problems. c.    Name the debts in the above facts that can be discharged and those that cannot. ANSWER: The debts in the above facts that can be discharged are certain debts that the party owes. On the other hand, the parties can set up a payment plan for those debts that cannot be discharged. There are several types of debt a person or business can accrue, not all of which are dischargeable through bankruptcy. Those not dischargeable are government tax claims, spousal and child support, customs fees, fines owed for convicted crimes, student loans, and secured debt. A secured debt is a debt owed to a creditor which is “secured” by a promised collateral item should the debtor not be able to pay. If this is the case the item or items are surrendered to the creditor as an alternative to a monetary payment. Debts that are dischargeable through bankruptcy are utility payments (electric, water, etc.), credit card payments, medical bills, legal and accounting payments, personal loans, and unsecured debt. Unsecured debt is a payment owed that is not “secured” by a collateral item. Read More