Business Organizations and Employment Law CHAPTER 18 Business Organizations and Employment Law

Introduction Paralegals commonly work with people in business as well as being employees of business entities themselves Knowledge of the various legal forms used by businesses is helpful in understanding legal issues that arise in this environment

Introduction This chapter reviews how a range of business organizations are formed and some of the key features of the different legal structures Agency law is a part of the common law that plays a role in almost all business relationships

Forms of Business Organization Traditionally Sole proprietorship Partnership Corporation Newer alternative forms Limited liability companies (LLC) Limited liability partnerships (LLP) Professional corporations (PC) Learning Objective: The major forms of business organizations and how each is created and operated. Learning Objective: How profits and liabilities are distributed in each business organizational form.

Forms of Business Organization Sole Proprietorships Formation of a sole proprietorship Advantages of sole proprietorships Disadvantages of sole proprietorships Taxation and sole proprietorships Termination of the sole proprietorship

Forms of Business Organization Partnerships The Uniform Partnership Act (UPA) Partnership formation Rights and duties of partners Default rules Obligation to partners Liability of partners Joint liability Joint and several liability

Forms of Business Organization Partnerships Taxation of partnerships Partnership termination Dissolution Winding up Limited partnerships General partners Limited partners

Forms of Business Organization

Forms of Business Organization Corporations Need basic knowledge of formation and operation Basic rights and responsibilities of participants Shareholders Shares Directors Officers

Forms of Business Organization Corporations Entity status Corporation formation Articles of incorporation Certificate of incorporation Corporate charter Bylaws

Forms of Business Organization Corporations Classifications of corporations Private corporation Public corporation Publicly held corporation For-profit or not-for-profit Close corporations Professional corporations

Forms of Business Organization Corporations Directors and officers Rights and responsibilities Dividends Potential liability Shareholders Limited liability Corporate taxation Types of stock Corporate termination Liquidation

Forms of Business Organization Online Incorporation Researching state requirements Incorporation is typically handled by the secretary of state’s office www.statelocalgov.net Online incorporation services Harvard Business Services The Company Corporation Corporation Service Company Technology tip

Forms of Business Organization Limited Liability Organizations Limited liability companies (LLC) Hybrid form of business enterprise Pass-through tax benefits of S corporations and partnerships Limited liability of limited partners and corporate shareholders

Forms of Business Organization Limited Liability Organizations Limited liability partnerships (LLP) Designed for professionals who normally do business as partners in a partnership Pass-through entity for tax purposes Limits personal liability of partners for partnership tort liability Professional corporations Limits liability of the other members

Forms of Business Organization The Paralegal and Business Organizations Paralegals carry out diverse tasks involving business organizations Reserve a corporate name Draft a partnership agreement Prepare articles of incorporation Prepare minutes of corporate meetings

Forms of Business Organization The Paralegal and Business Organizations Paralegals carry out diverse tasks involving business organizations Prepare documents relating to sale of corporate securities Assist in dissolution Assist in litigation Research state laws Monitor deadlines

Agency Law Common Law of Agency Pervasive concept in our society Agency relationship exists when one party (agent) agrees to act for another party (principal) All forms of business organizations involve agents Learning Objective: What agency relationships are and the significance of agency law for business relationships.

Agency Law Employees and Independent Contractors Hired to perform a specific undertaking Free to choose how and when to perform the work May or may not be an agent Courts look at degree of control and supervision

Agency Law Agency Formation Formed voluntarily by agreement of parties Agreement need not be in writing Agreement can be implied by conduct Agency relationship can arise through appearance of an agency, although it may not actually exist

Agency Law Fiduciary Duties Fiduciary relationship High degree of trust Confidence Duties run both ways Duty of loyalty Avoiding conflicts of interest Agent cannot represent two principals in the same transaction

Agency Law Agency Relationships and Third Parties When disputes arise over who should be liable Contract liability Tort liability Respondeat superior Vicarious liability Liability for independent contractors’ torts

Employment Law An employment relationships is established when a business hires an employee Traditionally these relationships were governed by common law in the United States Today, federal and state statutes Regulate the workplace extensively Provide employees with many rights and protections Learning Objective: How the government regulates employer–employee relationships.

Employment Law Employment at Will Either party may terminate relationship At any time, for any reason Unless contract or statute specifically provides otherwise Implied contracts Dismissed for “good cause”

Employment Law Restrictive Covenants Covenants not to compete Agree not to enter into competing businesses Agree not to solicit employer’s customers for a specific period of time Laws vary from state to state California does not enforce such agreements

Employment Law Wrongful Discharge Employee may bring an action for wrongful discharge If employer discharges an employee in violation of an employment contract If employer violates a statutory law Common law principles apply Constructive discharge Intolerable working conditions Reasonable person would feel compelled to quit

Employment Law Wage Laws Fair Labor Standards Act (FLSA) of 1938 Regulates overtime pay Regulates minimum hourly wages Overtime is 1.5 times regular hourly rate Minimum wage rate Set by Congress Changes periodically Many states have minimum wage laws Sometimes set higher minimums than federal law

Employment Law Family and Medical Leave Family and Medical Leave Act (FMLA) Time off work for family or medical reasons Leave rights Remedies for violation of FMLA Damages for unpaid wages Job reinstatement Promotion

Employment Law State Workers’ Compensation Laws Establish an administrative procedure for compensating workers injured on the job Injured worker files claim with administrative agency No fault Accidental Occurred on the job or in the course of employment No right to sue Workers’ comp is exclusive remedy

Employment Law Employment Discrimination Federal laws prohibiting employment discrimination Title VII of the Civil Rights Act of 1964 Prohibits discrimination based on race, color, national origin, and gender The Age Discrimination in Employment Act of 1967 Prohibits discrimination based on age The Americans with Disabilities Act of 1990 Prohibits discrimination based on disability

Employment Law Employment Discrimination Title VII of the Civil Rights Act of 1964 Sexual harassment Liability for harassment What did employer know? The Equal Employment Opportunity Commission Employers’ liability under Title VII Discrimination based on age

Employment Law Employment Discrimination Discrimination based on disability Reasonable accommodation Hardship

Employment Law Employment Law and the Paralegal Common tasks in area of labor and employment law Draft employment contracts Assist in drafting an employee handbook Prepare reports and furnish documentation Draft a policy manual Assist in litigation

Summary Sole proprietorship is the simplest form of business organization A partnership is created by the written or oral agreement of the parties to do business jointly as partners A corporation is created by a state-issued charter

Summary Other forms of business organization are the limited liability partnership (LLP), the limited liability company (LLC), and the professional corporation (PC) An agency relationship arises when one person agrees to act for or in the place of another person Employees who deal with third parties are normally considered to be agents of their employers

Summary The parties in an agency are held to certain obligations Traditionally, the employment relationship has been governed by the doctrine of “employment at will” as well as by common law rules relating to contracts, torts, and agency Both federal and state laws prohibit discrimination against employees in the workplace