Employers Liability, Companies and Partnerships - Assignment Example

Employer’s Liability, Companies and Partnerships of Response to Question (a) Basis Upon Which an Employer is Legally Responsible for Negligent Actions of an Employee Negligence is contained in the law of torts. The law of torts seeks to establish the relationship between people, and whether one is liable for negligence or not (Geistfeld, 2014, p. 1008). For one to be liable, there has to exist a duty of care which a person breached, thus causing injury or damage to someone else. Under the law of torts, one is usually liable for their negligent actions (Nezar, 2011, p. 680; Green & Moreteau, 2012, p. 291). However, the law at times holds employers responsible for the negligent conduct of their employees. That depends on various factors that determine such liability. That is despite the fact that the employer may not have authorised such action by the employee or may not have had any intention to cause any damage or harm (Yoder, 2010, p. 1106). That is usually under the doctrine of vicarious liability. This doctrine has the effect of rendering the employer liable for negligence committed by his employees while performing their duties as per their employment. Thus, when an employee is negligent while performing his duties in the prescribed manner by the employer, the employer shall be liable (Giliker, 2011, p. 42; Giliker, 2013a. p. 64; and Giliker, 2013b, p. 309). There are several incidents where an employer can be liable for negligent actions of employees. These may include job related accidents, negligent hiring or retention and harassment. The doctrine of respondeat superior places responsibility on the employer over negligence on the part of employees towards third parties to whom the employer owes a duty of care. This is because the employer is an agent of the employer and so represents the employer. However, for this to hold, the employee should act within the regulation of the signed contract (Burns, 2011, p. 670). Job-Related Accidents or Misconduct An employer is legally liable for any accident that results from the actions of his/her employee while executing his/her duties in that engagement as an employee. This is however, applicable if the employee was acting within the scope of his employment. An employee is considered acting within permissible limits if the act is authorised by the employer or if it has a close connection to an act that is authorised. The law sets to differentiate between an employee that causes a job related accident and one that causes an accident while on the job. The employer can only be liable if the employee was carrying out official business as assigned by the employer under the employment contract when the incident occurred. Otherwise, the employer may not be liable. The rule of respondient superior seeks to hold employers accountable for the carelessness or misconduct of employees as it forms part of the operating costs for the employer (Neild, 2013, 714). However, when an employee acts with personal motives, or deviates from the employment contract and in the process causes an accident, the employer is not liable. The employee will be liable, as he was not acting as defined in the contract. An example is a company driver, who deviates from his normal route to go meet a friend and in the process hits a pedestrian. The company will bear no liability for the accident, as the driver was not within the framework of his engagement when the accident happened. It is held that he was on his personal business hence should be liable for the accident. For cases of employees suffering injury due to negligence by co-workers, an employee can use workers’ compensation to protect him from liability. In that case, the worker will make a workers’ compensation claim for injuries caused by co-workers acting within their scope of employment. The claims would normally cater for medical bills, lost incomes or any other losses caused by the accident (Collins, 2012, p. 184). The employees may only sue the employer if the employer intentionally caused the injuries to them. Negligent or Careless Hiring and Retention Negligent hiring refers to employing a person without due care to establish the professionalism of the worker or his past conduct with regard to handling third parties. Negligent retention on the other hand is the keeping of a person in employment even after learning that such a person poses a potential danger to others. A person injured by an employee may sue the employer for failing to take due care in employing the particular employee. The law can also hold an employer accountable for damages or injuries caused by an employee if it is apparent that the employer kept the employee in employment even after realizing that he was a danger to others. The employer may not necessarily authorise the actions of the employee for him to be liable. The employee may also not be necessarily working within the scope of his employment. The victim only needs to point out the employer’s negligence in the hiring or retention of the employee for him to be liable. The employer is held liable because he by hiring the employee, he provides access of the employee to potential victims (Glannon, 2010, p. 45). It is important, therefore, that during hiring the employer should look into a person’s criminal past to establish the extent to which he/she is suitable for the job. An employers failure to do this renders him negligent and places liability on him for any damage caused by the employee in the cause of his employment. Such acts as robbery, theft, fraud and even rape fall under this category of acts that an employer may be responsible for in regards to negligent hiring. A good example can be a school, which hires, without performing a background check, a person who the court had previously convicted of child molestation. If the person later molests one of the students at the school, the school will be liable for negligent hiring as they failed to conduct a background check to establish his/her criminal past. There are several ways in which an employer can avoid being liable for negligence hiring. These may include performing background checks on potential employees before hiring them, applying special care especially when hiring workers who will constantly be in contact with the public and getting rid of employers who prove to be dangerous with regard to the nature of work they perform. Background checks should be intensive to verify the information on the resumes of the applicants. An employer should try getting as much information about a potential employee as possible. This will reduce the risk of liability due to negligent hiring. Employers should screen thoroughly workers that will be highly involved with the public. This is because of the nature of their jobs. An employer is held accountable for damages caused by such employees. Such employees include those that deal with weapons, people working with vulnerable persons such as children and the disabled and those that visit houses to make deliveries. The employer should thus handle their hiring carefully to establish the extent to which they may pose danger to the public. Once an employer makes a discovery that an employee is potentially dangerous, he should do everything possible to make sure the employer cannot cause harm to anyone. This may include firing the employee if necessary. Failure to deal with such employees renders an employer liable for his actions. Harassment Harassment can be in different forms. It may involve discriminatory treatment of one based on sex, race, religion, age, colour or even disability. This usually happens in the work place and the victims are usually employees. One employee may subject others below his to harassment in the work place. The employer is liable for acts by employees when such acts amount to harassment. The employer is only not liable if he proves that he acted with reasonable care to prevent or stop any kind of harassment in the workplace. The employer may also avoid liability for harassment if he proves that victim failed to report the harassment to the management or encouraged such harassment. For the employer to avoid liability, he should establish and enforce a harassment policy that prohibits harassment and set out a definite procedure of making complaints on harassment. This policy should preferably be in writing to provide some point of reference. A strong and impartial system of investigating and solving complaints that may arise should back the policy in order to avoid liability based on harassment. Employers can mitigate their liability to damages or injuries caused by actions of their employees by observing greater care in the hiring and management of the employees. Setting proper guidelines to guide the conduct of the employers in their work and taking appropriate corrective measures against employees that deviate from the guidelines will help ensure employees conduct themselves diligently and with due care to avoid causing harm to others. Response to Question (b) In the business world, there are several forms of business organisation. Each of these forms has its own technicalities in the formation and running. Among these forms of business, we have partnerships and companies. A partnership is a business usually owned by more than one person. The owners can be two or more people with a joint interest in the business. The limit of the number of partners in a partnership is usually determined by the nature partnership. On the other hand, a company is a legal entity separate from its members. The law distinguishes it as a legal person that can transact in its own name. Companies can also fall into different categories depending on the formation. A company has several features that distinguish it from all other organisations (Borg-Barthet, 2013, p. 508). Some of these features include separate legal identity, limited liability, perpetual existence and separate property. Companies are also chacterized by freedom to transfer shares, have a common seal as well as the capacity to sue and be sued. They also have separate management and one share-one vote. Separate Legal Identity The law gives a company legal existence as a different entity distinct from its owners. The company has its own name and carries out business in its own capacity as a legal person. As an artificial person created by the law, a company may own property, borrow money, incur debts, enter into contracts, sue, appear in court to answer suits by others, employ people and even run a bank account. It is able to do all these independent of its owners. The company also has its own official seal (Mancuso, 2013, p. 47). Limited Liability There is legal protection of the owners of the company from liability due to the company’s operations. Debts and any other obligations incurred by the company can only be borne by the owners up to a certain limit. Limited Liability can be by shares or by guarantee. Under limited liability by shares, the owners’ liability is limited to the number of shares one has in the company. A member of the company will only require to make contributions towards settling debts up to value of uncalled money due on his shares (Mancuso, 2013, p. 39). In instances where a given firm cannot pay its liabilities, the creditors cannot force the owners to contribute towards the debts beyond their share contribution from their personal property. Perpetual Succession Unlike a partnership, which ceases to exist when one partner dies or when a given task is completed, a company has a life that stretches beyond the life of its members. The members of the company may change over time but the company remains unaffected. It continues to exist even when a member or members die, become insolvent, or insane, or leave the company. What may change is the ownership as new shareholders buy shares in the company but the life continues to exist. In addition, the company’s life is not limited to the achievement of a set goal or objective. Hence, its winding up cannot initiate when the company achieves such objective. Separate Property As a legal entity, the law allows a company to own property in its name. No member can lay claim on any property that is in the name of the company. The members only have an interest on the company and not its property as the property belongs to the company. The members can only get a share of the property when the company is wound up and liquidator liquidates the assets to offset all liabilities and pay back the members their capital investment (Mancuso, 2013, p. 51). Transferability of shares Any member of the company can freely transfer the company’s shares to another person. This is however subject to some conditions that the company may set to protect it. Any transfer of shares has the effect of giving the transferee all the rights in the company that the transferor had. The free transfer of shares contributes to the perpetual existence of the company as new members can come in without the company having to wind up first. It allows ownership to change without interfering with the life of the company hence the life is not dependent on the existence of the shareholders. Common Seal A company does not exist physically, as it is an artificial person and thus cannot act on its own. The shareholders therefore appoint a Board of Directors to transact business on behalf of the company. The Board of Directors enters into agreements and contracts with other companies and people on behalf of the company. As the company is an artificial person, it cannot sign such contracts. It therefore uses its common seal as its signature. The Board of Directors must ensure the contracts they enter into on behalf of the company are under the seal of the company otherwise they are not legally binding (Carrigan, F., 2011, p. 37). Capacity to Sue and be sued As a legal person, the company has the ability to sue any party in a court of law in its own name. It can appoint a lawyer to represent it in any case against any person or company. The company may also appear in court to answer charges or suits against it. This happens independently of its owners. The company derives this capability from the fact that a company is separate from its owners and thus it bears its own legal obligations as a person. Separate Management The owners of the company do not necessarily manage the company. A Board of Directors that the owners appoint runs its day-to-day activities. The Board usually comprises of professionals who will ensure the company registers a constant good performance. The shareholders do not have much say in the day-to-day running of the company. They can only influence decisions during general meetings where they can contribute their opinions and suggestions for implementation. Being shareholders does not necessarily give them rights to be directors. One Share-One Vote When it comes to voting in a company, each member has voting rights depending on the shares he has. The higher the number of votes one has the more the voting powers held. This is because every share has one vote and so the more shares one has the more votes. This allows the major shareholders have a say in the company and influence decisions. This helps to protect their interests as they have invested more into the company through the big number of shares they hold. This would not be so if every member had just a single vote regardless of the number of shares held. Differences between a Company and a partnership A company and a partnership differ in many aspects ranging from formation to dissolution. These differences help one distinguish one from the other and form preferences depending on the needs of the investors. In the formation, a company requires registration, which may be a lengthy process that has many regulations to follow. However, a partnership does not need undergo the registration process in order to start operating. Its formation can be informal or formal by writing up a partnership Deed. A registered company is also a legal person separate from its owners. The partnership on the other hand is not a body corporate and hence there is no distinction between the partnership and its owners. The law considers any business carried out by the partnership as being business by the owners. Legally, the shares of a company are freely transferable unless the company expressly restricts such transfer on some basis. For a partnership, the partners are not free to transfer their interests to another party. Any such transfer has the effect of ending the life of the partnership (Merrifield, 2005, p. 18). Members of a company are not charged with the day-to-day running of the company. However, that is not the case with a partnership as the partners have a duty to take part in the management. Under the law, a member is not an agent of the company and may not represent the company in any transaction. However, each partner in a partnership acts as an agent for the partnership and binds the partnership in any contract he enters. Legally, a member is not liable for debts of the company, as they are not his. For a partner, he is personally liable jointly with the other partners for any debt incurred by the partnership (Merrifield, 2005, p. 17). The ultra vires rule, which requires a company to work within its objectives, limits the powers of a company. However, partnerships enjoy freedom to diversify operations as the rule has limited application to them. A partnership’ termination may be due to a number of causes including death, insanity or bankruptcy of a partner. Such factors however do not affect the life of a company. A company owns property in its own name separate from the shareholders. The members cannot therefore insure company property in their name, as they do not have insurable interest in the property. On the other hand, partners can insure a firm’s property as it is the property of the partners. Recommendations on the structure to adopt Though a company may have some complications in its formation, it offers a better from of business. That is because of its unique nature such as separate legal entity that set it apart from the owners. The limited liability offered by the company also protects the owners from liabilities of the firm. With a company, there is also increased access to funds as it can sell shares to raise capital. The success rate of the company may also be higher as it employs the services of professional directors in its management. This allows for the growth of the business, as the management work does not overwhelm the members since professionals do the management work. Jane and Cherry should therefore convert the partnership into a company. 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