Business Law - Managerial and Operational Activities of the Firm due to the Legal Obligations - Research Paper Example

California State, the major employment legal tussles the business organizations are facing is the definition of workers and validity of the non-competition agreement. The labor law of California has two definitions of workers as either independent contractors or employees under labor code 2750.5 (Californi Law, 2013). Similarly, labor laws define the circumstances under which a business organization can draw a non-competition agreement under labor code 16601 of the California labor law.       

Cases

One of the cases filed involves how workers are classified as independent contractors or employees (Narayan v. EGL, Inc., 2007). EGL which is a transportation company has been sued by three of its truck drivers for failing to offer employees benefits as required by the California labor code. The truck drivers had signed an agreement with the company to indicate that they are independent contractors. Despite this agreement, they sued EGL for failing to offer them benefits enjoyed by employees under labor code 2802(a) (California Law, 2013). The appeal court of California held that there were facts to show the truck drivers were employees rather than independent contractors as the EGL firm claimed. Consequently, the drivers were entitled to employee benefits provided under the California labor code.

Another recent case involves non-compete agreements that employers apply to deny employees to leave their job to work for a competitor by using the knowledge and expertise they earned from their previous position under business and profession code 16601. In Silguero vs. Creteguard incorporation, the plaintiff sued the defendant for unjust termination of work by upholding the non-compete agreement of the previous employer (Silguero V. Creteguard, Inc, 2010). Silguero as a sales representative of Floor Seal Technology (FST) agreed to undertake a non-compete agreement for fear of been sacked by the employer. However, FST terminated his work after two months that forced him to seek employment in the Creteguard firm. Consequently, Creteguard terminated his job after it was informed by FST of the existence of a non-compete agreement with Silguero. Accordingly, the California court of appeal dismissed the validity of a non-compete agreement under the California labor law.

Rationale

            The findings of the two courts are informed by various critical reasons on the liberties of the employees as provided under the labor laws of California. In Narayan vs. EGL Company, the judges evaluated the supervision level the truck drivers were receiving from the company in undertaking their duties. To the extent that the drivers were distributing the firm’s products under the direction and supervision of the firm’s management, it was a clear indication they were under employment supervision like other ordinary employees of the firm. The denial by the firm to grant them full autonomy in scheduling their distribution routes and strategies negated the very requirement of an independent agreement. Consequently, truck drivers are entitled to receive full employment benefits provided under labor code 2802(a) of the California labor laws.

            Similarly, the judgment the judges of the appeal court of California made on Silguero vs. Creteguard firm is informed by legal observation. Even though the California business and profession code under section 16601 provides for non-compete agreements, it can only apply to owners of a partnership, limited companies, and corporations. Indeed, the labor code under Business and profession Code Section 16600 defends an employee from employment dismissal through a non-compete agreement (Californi Law, 2013). Thus, the rationale behind the decision of the judges was to protect the rights of employees against unfair termination of work by employers.          

Social Impact

            The findings of the court have the potential of improving the social welfare of the employees in an organization. This is because the rulings give persons working in a given entity within California more liberty to enjoy the employees’ rights. The finding by the appellate court that the nature of the interaction of the workers is primary in defining whether a worker is an employee or an independent contractor is a great achievement in enhancing the social welfare of the workers. This is because employers can take advantage of workers in forcing them to sign independent agreements in order to deny them employees’ benefits when their interaction is actually of an ordinary employee and employer. Similarly, the rejection by the court to validate the non-competition agreement is a step towards improving the welfare of the employees. This is because it safeguards unfair termination of employees for refusing to obey the agreement after they lose their job. If the agreement is maintained, it has the potential of causing families to suffer once their breadwinner loses a job and is restricted from attaining another job from a prospective employer.    

Personal Opinion

            Personally, the clarity of the law in the two different business legal cases is essential in enabling the operations of the businesses. Indeed, the clarity on the definition of the workers is significant in protecting firms from incurring huge charges by the government when they fail to submit tax returns for workers misclassified. The clarity on labor law will help the firm to classify workers operating in their premises and business activities correctly. Similarly, the declaration by the court on the validity of the non-competition agreement will help the firm in acquiring competent and talented employees in the market. This is because the dismissal of the non-competition agreement restricting employees to work for the subsequent employer will help the employer in attracting employees from rival competitors who exhibit high professional competency and skills without legal hindrances.