Business Law
Assignment 4, Answer
ch 16 / ch 18 / ch 20 / ch 211.b / 1.a / 1.a / 1.c
2.b / 2.b / 2.d / 2.b
3.a / 3.c / 3.c / 3.c
4.b / 4.a / 4.a / 4.b
5.c / 5.a / 5.c / 5.b
6.c / 6.b / 6.b / 6.c
7.a / 7.a / 7.b / 7.d
8.c / 8.b / 8.c / 8.c
9.a / 9.a / 9.d / 9.c
10.b / 10.d / 10.a / 10.c
Case 1
National Foods, Inc., sells franchises to its fastfood restaurants, known as Chicky-D’s. Under the franchise agreement, franchisees agree to hire and train employees strictly according to Chicky-D’s standards. Chicky-D’s regional supervisors are required to approve all job candidates before they are hired and all general policies affecting those employees. Chicky-D’s reserves the right to terminate a franchise for violating the franchisor’s rules. In practice, however, Chicky-D’s regional supervisors routinely approve new employees and individual franchisees’ policies. After several incidents of racist comments and conduct by Tim,a recently hired assistant manager at a Chicky-D’s, Sharon, a counterperson at the restaurant, resigns. Sharon files a suit in a federal district court against National. National files a motion for summary judgment, arguing that it is not liable for harassment by franchise employees. Will the court grant National’s motion? Why or why not?
Sample Answer:
Define the Issue: harassment in the workplace
Analyze and Assess: The court would likely conclude that National Foods was responsible for the acts of harassment by the manager at the franchised restaurant, on the ground that the employees were the agents of National Foods. An agency relationship can be implied from the circumstances and conduct of the parties.The important question is the degree of control that a franchisor has over its franchisees. Whether it exercises that control is beside the point.
Conclude: Here, National Foods retained considerable control over the new hires and the franchisee’s policies, as well as the right to terminate the franchise for violations. That its supervisors routinely approved the policies would not undercut National Foods’ liability.
Case 2
AstroStar, Inc., has a board of directors consisting of three members (Eckhart, Dolan, and Macero) and has approximately five hundred shareholders. At a regular board meeting, the board selects Galiard as president of the corporation by a two-to-one vote, with Eckhart dissenting. The minutes of the meeting do not register Eckhart’s dissenting vote. Later, an audit discovers that Galiard is a former convict and has embezzled $500,000 from the corporation that is not covered by insurance. Can the corporation hold directors Eckhart, Dolan, and Macero personally liable? Discuss.
Sample Answer:
Define the issue: Breach of duty and fail to exercise reasonable care
Analyze and Assess: Directors are personally answerable to the corporation and the shareholders for breach of their duty to exercise reasonable care in conducting the affairs of the corporation. Reasonable care is defined as being the degree of care that a reasonably prudent person would use in the conduct of personal business affairs. When directors delegate the running of the corporate affairs to officers, the directors are expected to use reasonable care in the selection and supervision of such officers. Failure to do so will make the directors liable for negligence or mismanagement. A director who dissents to an action by the board is not personally liable for losses resulting from that action. Unless the dissent is entered into the board meeting minutes, however, the director is presumed to have assented.
Conclude: Therefore, the first issue in the case of AstroStar, Inc., is whether the board members failed to use reasonable care in the selection of the president. If so, and particularly if the board failed to provide a reasonable amount of supervision (and openly embezzled funds indicate that failure), the directors will be personally liable. This liability will include Eckhart unless she can prove that she dissented and that she tried to reasonably supervise the new president. Considering the facts in this case, it is questionable that Eckhart could prove this.
Case 3
Denton and Carlo were employed at an appliance plant. Their job required them to perform occasional maintenance work while standing on a wire mesh twenty feet above the plant floor. Other employees had fallen through the mesh, and one of them had been killed by the fall. When Denton and Carlo were asked by their supervisor to perform tasks that would likely require them to walk on the mesh, they refused because of their fear of bodily harm or death. Because of their refusal to do the requested work, the two employees were fired from their jobs. Was their discharge wrongful? If so, under what federal employment law? To what federal agency or department should they turn for assistance?
Sample Answer:
Define the Issue: Unreasonable discharge
Analyze and Assess: The Occupational Health and Safety Act (OSHA) requires employers to provide safe working conditions for employees. The act prohibits employers from discharging or discriminating against any employee who refuses to work when the employee believes in good faith that he or she will risk death or great bodily harm by undertaking the employment activity.
Conclude; Denton and Carlo had sufficient reason to believe that the maintenance job required of them by their employer involved great risk, and therefore, under OSHA, their discharge was wrongful. Denton and Carlo can turn to the Occupational Safety and Health Administration, which is part of the Department of Labor, for assistance.
Case 4
Chinawa, a major processor of cheese sold throughout the United States, employs one hundred workers at its principal processing plant. The plant is located in Heartland Corners, which has a population that is 50 percent white and 25 percent African American, with the balance Hispanic American, Asian American, and others. Chinawa requires a high school diploma as a condition of employment for its cleaning crew. Three-fourths of the white population complete high school, compared with only one-fourth of those in the minority groups. Chinawa has an all-white cleaning crew. Has Chinawa violated Title VII of the Civil Rights Act of 1964? Explain.
Sample Answer:
Define the issue: Employment and job requirements
Analyze and assess: An employer can legally impose an educational requirement if the requirement is directly related to, and necessary for, performance of the job. In this situation, the employer is requiring a high school diploma as a condition of employment for its cleaning crew. A high school diploma is not related to, or necessary for, the competent performance of a job on a cleaning crew. Chinawa obviously comes under Title VII of the 1964 Civil Rights Act, as amended.
Conclude:Therefore, if someone were to challenge Chinawa’s practices, a court would be likely to consider the disparate impact that the educational requirement had on Chinawa’s hiring of minorities. Chinawa’s educational requirement resulted in its hiring an all-white cleaning crew in an area in which 75 percent of the pool of qualified applicants were minorities. Therefore, Chinawa’s educational requirement would likely be considered unintentional (disparate-impact) discrimination against minorities.