CHAPTER 15 Agency: Principal and Agent create a fiduciary relationship Principal: has the right to control the agent

in matters entrusted to the agent, and agent owes special duties; Principals use agents to be able to conduct multiple business operations simultaneously in various locations. Agency relationship: Agency is a fiduciary relationship based on trust and confidence. Child labor: Fair Labor Standards Act (1938) prohibits oppressive child labor practices. Provides regulations for work, depending on the age of child. Fair Labor Standards Act: Applies to employers engaged in interstate commerce Employees who agree to work more than 40 hours per week must be paid no less than one and a half times regular pay; except executives, administrative employees, professional employees, and outside salespersons Occupational Safety & Health Act: Enacted in 1970 and signed into law by President Nixon; Mission: to prevent work-related injuries, illnesses, and deaths by issuing and enforcing rules. Income security: Social Security Act of 1935; Medicare; Private Pension Plans; Employee Retirement Income Security Act (ERISA) of 1974 regulates operators of private pension funds; Unemployment Compensation; Federal Unemployment Tax Act of 1939 COBRA: Consolidated Omnibus Budget Reconciliation Act of 1985: Prohibits elimination of a workers medical, optical, or dental insurance coverage on the termination (voluntary or involuntary) employment; exception is employee fired for gross misconduct Family & Medical Leave Act: Protects employees who need time off work for family or medical reasons: Provides up to 12 weeks of health care coverage and guarantees employment; Care for new children; Care for seriously ill; Exceptions; Key employee (pay top 10% of workforce); Less than one year of service; Less than 25 hours per week in last 12 months. Immigration law: Immigration Reform and Control Act of 1986: Amnesty to certain groups of illegal aliens living in the United States; Sanctions for employers; Criminal and Civil Penalties; Antidiscrimination Provisions; Immigration Act of 1990. Labor unions: Labor Management Relations Act: Prohibits certain unfair union practices such as closed shops.

Labor-Management Reporting and Disclosure Act: Regulates the internal operations of unions and outlaws hot-cargo agreements. Union organization: Collective Bargaining; Strikes; Right to Strike; Rights of Strikers After Strike Ends: Generally, employer has a right to hire permanent replacements. Chapter Review: Employees who deal with third parties are agents of their employers. T An independent contractor is one whose physical conduct is controlled, or subject to control, by his or her employer. F An agent whose employer does not have the right to control the agents performance is an independent contractor. T An agent who fails to use reasonable diligence and skill in acting on behalf of his or her principal may be liable for breaching a duty of performance. T Joyce works for Kappa Services Corporation as an independent contractor, and not as an employee, if a. Joyce says that she works as an independent contractor. b. Joyce works on a permanent basis. c. Kappa does not control Joyces work. d. Kappa withholds taxes from its payments to Joyce. Dana, an agent for Evan, signs an agreement on Evans behalf but neglects to tell Evan that the agreement requires the payment of certain taxes. The government prosecutes Evan for failing to pay the taxes. Evan is a. liable, because Danas knowledge is assumed to be known by Evan. b. liable, because paying taxes is mandated by the Constitution. c. not liable, because he was not given adequate notice. d. not liable, because he was not informed of the tax liability by Dana. Ellen, a salesperson at Fine Tile Company, tells a customer, Buy your tile here, and Ill install it myself for half of what Fine would charge you. The customer makes the purchase based on Ellens representation. Ellen installs the tile, charges the customer $500, and keeps the money. Ellen has breached the duty of a. loyalty. b. notification. c. obedience. d. none of the above. Over a forty-year period, Ellen worked in a variety of jobs. She was also occasionally unemployed, briefly hospitalized, and suffered a temporary disability. She retired last year. The key federal law on all of these subjects is a. the Consolidated Omnibus Budget Reconciliation Act. b. the Employee Retirement Income Security Act. c. the Federal Insurance Contributions Act. d. the Social Security Act.

CHAPTER 16 Title VII Civil Rights Act: Landmark legislation! The original purpose of the Bill was to protect African-American men from job (and other) discrimination It was expanded to include protection for women. Title VII prohibits discrimination in employment on the basis of race, sex, color, religion, and national origin. Sex now includes pregnancy. In addition to prohibiting religious discrimination, employers must reasonably accommodate an employees religious practices. Enforcement of Title VII by EEOC. Intentional and Unintentional Discrimination Discrimination based on race, color, and national origin Discrimination based on religion Discrimination based on gender Sexual Harassment Equal Employment Opportunity Commission (EEOC) issues guidelines Investigates priority cases that affect many workers Retaliatory discharge (firing) Discrimination cases of concern

Employment Discrimination Treating employees or job applicants unequally on the basis of identifiable characteristics Disparate-treatment discrimination When an employer intentionally discriminates against employees who are members of a protected class Disparate-impact discrimination Form of employment discrimination that results from certain employer practices or procedures which have a discriminatory effect though none was intended. EEOCs four-fifths rule Reverse discrimination

Sexual Harassment: Quid pro quo Job opportunities and promotions are provided on the basis of sexual favors Hostile Environment Employee is subject to offensive comments, jokes or physical contact. Harassment by Supervisors In quid pro quo case, employer is strictly liable for the supervisors actions

In a hostile environment case, employer is liable only if it knew or should have known and failed to act. For an employer to be held liable, tangible employment action (change in status) must have been taken by supervisor against the employee.

Age Discrimination Act: Employment Act (ADEA) (1967) prohibits employment discrimination on the basis of age against individuals 40 years of age or older. Also prohibits mandatory retirement for non managerial employees Provision for government employees Numerous cases of alleged age discrimination against employers cut costs by replacing older, higher-salaried workers To prevail on a claim under ADA, plaintiff must show she: Has a disability and Is otherwise qualified for the employment in question; and Was excluded from employment solely because of the disability. Workforce must be more than 15 employees Plaintiff must first exhaust administrative relief with EEOC. Americans with Disabilities Act: The Americans with Disability Act (ADA) (1990) requires employers to offer reasonable accommodation to employees or applicants with a disability who are otherwise qualified for the job they hold or seek. The duty of reasonable accommodation ends at the point at where it becomes an undue hardship. Affirmative Action: Job hiring policies that give special consideration to members of protected classes in an effort to overcome present effects of past discrimination. Applies to federal contracts AA has led to reverse discrimination cases which violate equal protection. University of California v. Bakke (1978). Chapter Review: Title VII of the Civil Rights Act of 1964 prohibits job discrimination on the basis of education and experience. F Title VII does not prohibit unintentional discrimination. F To maintain an action against an employer on the basis of disparate-treatment discrimination, a person must show that he or she is a member of a protected class. T Disparate-treatment discrimination occurs when an employer intentionally discriminates against an employee who is a member of a protected class. T

A woman affected by pregnancy, childbirth, or a related medical condition may be treated for all employment-related purposes in the same manner as an employer would treat any temporarily disabled employee. T Employers can be liable for Title VII violations by their managers or supervisors. T An employer is not liable for Title VII violations by lower-level employees. F An employer is not liable for Title VII violations by nonemployees. F Title VII does not cover employees conduct in the online world. F Standard Company denies a promotion to Tony, a member of a minority, when he fails to pass a required test. Few members of minorities have passed the test. The number of promoted employees who are members of minorities does not reflect their percentage in the local labor market. In a suit against Standard, if Tony can show a connection between the test and the number of promoted minority members, a. it must be proved that Standard had discriminatory intent. b. it must be proved that Standard has other discriminatory practices. c. it must be proved that the test had a discriminatory purpose. d. no evidence of discriminatory intent is necessary. Julie, who is Hispanic, applies for a job at Macro Manufacturing Company. The interviewer says that Macro hires Hispanics, but does not hire African Americans. This is a. impermissible discrimination on the basis of race. b. not discrimination. c. permissible discrimination at the application stage of employment. d. permissible discrimination at any stage of employment. Jill, who works as an employee for Interstate Transport Corporation, is pregnant. Under the Pregnancy Discrimination Act of 1978, if Jill is unable to perform her job due to her pregnancy-related condition, she is a. entitled to disability leave, regardless of how Interstate would treat other temporarily disabled employees. b. entitled to disability leave, only if that is how Interstate would treat other temporarily disabled employees. c. not entitled to disability leave. d. only entitled to leave without pay. Happy Restaurant does not take any action to prevent sexual harassment of its employees. It may be liable for such harassment by a. a supervisor or employee only. b. a customer only. c. a supervisor, an employee, or a customer. d. none of the above.

Marie, an employee of Nickel Tool Company, files a sexual-harassment suit against Owen, her supervisor. Marie wins. Nickel may also be liable if it had effective harassment policies, complaint procedures, and a. Marie failed to follow them. b. Marie followed them. c. Owen failed to follow them. d. Owen followed them. Gene is passed over for a promotion and then discharged by his employer, Beta Digital Corporation. Gene files a suit against Beta on the ground of employment discrimination under Title VII. If Gene wins, he may be awarded a. back pay and damages only. b. job reinstatement and a retroactive promotion only. c. back pay, damages, job reinstatement, and a retroactive promotion. d. none of the above. Bob works for City Barber Shop as a barber. Sue works for Town Beauty Salon as a beautician. Their jobs are essentially equal. Bob is paid more than Sue. Under the Equal Pay Act of 1963, a. Bobs pay must be reduced to match Sues pay. b. Sues pay must be increased to match Bobs pay. c. either a or b. d. none of the above.

CHAPTER 17 Environmental Law: The principal sources of environmental law are: Common Law Actions. State and Local Regulation. Federal Regulation. Nuisance. Person liable if they use their property in a manner that unreasonably interferes with others rights to use or enjoy their own property. Negligence and Strict Liability. Business or person alleged failure to use reasonable care toward a party whose injury was foreseeable and, or course, caused by the lack of reasonable care. Environmental Protection Agency (Federal): President Nixon forms EPA in 1970 EPA sets standards for major pollutants Protects water, air, vegetation, climate, visibility from pollution and toxic chemicals

Environmental Impact Statements: Required by Natl Environmental Policy Act EIS analyzes environmental impact adverse effects alternative actions that might be taken irreversible effects action might cause Air Pollution: The Clean Air Act 1963 Focus on multi-state air pollution Provides assistance to states Amendments strengthened federal authority to regulate air quality Water Pollution: How does it get polluted? Industrial, municipal, and agricultural Organic wastes, heated water, sediments from soil runoff Detergents, fertilizers, human and animal wastes Federal Water Pollution Control Act (FWPCA) 1948 Amended by 1972 Clean Water Act establishes goals, standards, and timetables to make waters safe for swimming protect fish and wildlife stop discharge of pollutants Hazardous Pollutants: There are 189 hazardous air pollutants including: asbestos benzene beryllium cadmium mercury vinyl chloride National Environmental Policy Act 1969: Requires federal agencies to prepare environmental impact statements (EIS) when major federal actions significantly affect the quality of the environment EIS can be used by private citizens and corporations. Toxic Chemicals: Pesticides & Herbicides are regulated under the Federal Insecticide, Fungicide, and Rodenticide Act of 1947 must be registered before they can be sold certified and used only for approved applications used in limited quantities on food substances

The Toxic Substances Control Act of 1976 regulates chemicals and provides for investigation of any possible harmful effects

CHAPTER REVIEW: Environmental law is new. F Common law remedies against environmental pollution originated centuries ago. T Common law actions can be brought against business firms for damage caused by pollution. T Federal regulatory agencies must take environmental factors into consideration when making significant decisions. T An environmental impact statement is required for federal government projects only. F An environmental impact statement is required for private business projects only. F Anyone planning to use a toxic chemical may be ordered to first determine its effect on human health and the environment. T Corporate officers may be subject to criminal penalties for violations of the Clean Air Act. T The Environmental Protection Agency does not regulate toxic substances. F CompuTex, Inc., operates a silicon chip plant. To be certain that the firm is in compliance with all applicable environmental laws, CompuTex should consult a. federal, state, and local authorities. b. federal and state authorities only. c. federal authorities only. d. none of the above. Ore Resources, Inc, operates an open-pit mine. Nearby farmers file a suit against Ore Resources, alleging injuries from its operation. The farmers need to show that the business failed to exercise reasonable care if their suit is based on a. a nuisance theory. b. a negligence theory. c. a strict liability theory. d. all of the above. Pacific Power Corporation wants to build a nuclear power plant on private land. For this action, an environmental impact statement is a. prohibited. b. required. c. unnecessary. d. voluntary.

Resource Mining Corporation operates a smelter subject to air pollution regulations. The maximum levels of certain pollutants in the air are set by a. the Environmental Protection Agency. b. the state governments. c. the Environmental Protection Agency and state governments. d. none of the above. Magna Solvents Corporation has waste that it wants to discharge into navigable waters. Under the Clean Water Act, Magna must apply for a permit a. after discharging waste. b. before discharging waste. c. simultaneous with the discharge of waste. d. none of the above. Green Markets, Inc., which operates grocery stores in six states, must under federal law, display for customers brochures on pesticides in food produced by a. Green. b. the companies that make the pesticides. c. the Environmental Protection Agency. d. the farmers who produce the food.

CHAPTER 18 Sherman Antitrust Act: Only applies to restraints that have a substantial impact on interstate commerce. Also extends to U.S. nationals working abroad who are engaged in activities that have an effect on U.S. foreign commerce. Courts have construed interstate commerce broadly, bringing local activities under power of national government. Sherman Act Section 1: Section 1 regulates what are called horizontal and vertical restraints. Per se violations vs. the Rule of Reason. Per se violations are blatant and substantially anticompetitive. Rule of reason agreements do not unreasonably restrain trade. Sherman Act Section 2: Section 2 of the Sherman Antitrust Act deals with: Monopolization. Attempts to Monopolize. Predatory pricing. Attempt by a firm to drive its competitor from the market by selling its product at prices substantially below the normal costs of production.

Horizontal Restraints: Horizontal restraints are agreements among Sellers (or Buyers) that restrain competition between rival firms competing in the same market. Price Fixing: An agreement between competing firms in the market to set an established price for the goods or services they offer. Price fixing is a per se violation of the Act. Group Boycotts: Agreement between two or more sellers to refuse to deal with a particular person or firm. Group boycotts are per se violations of the Act. Horizontal Market Division: Occurs when competitors in the same market agree that each will have exclusive rights to operate in a particular geographic area. Horizontal market divisions are per se violations of the Act. Trade Associations: Industry specific organizations. Rule of reason is applied to determine if a violation of the Act has occurred. Concentrated Industry: small firms control large percentage of market sales. Vertical Restraints: Vertical restraints are per se anticompetitive agreements imposed by Sellers upon Buyers (or vice versa) that may include affiliates in the entire supply chain of production. Agreements between firms at different levels of the manufacturing and distribution process. Vertical restraints may restrain competition among firms that occupy the same level in chain. Vertical restraints that significantly affect competition may be per se violations. Territorial or Customer Restrictions: Imposed by manufacturers on the sellers of the products, to insulate dealers from direct competition with each other. Territorial and customer restrictions are judged under the rule of reason. Resale Price Maintenance Agreements: An agreements between a manufacturer and a distributor or retailer in which the manufacturer specifies the retail price at which retailers must sell products furnished by the manufacturer or distributor. This is a type of vertical restraint and is normally a per se violation. Monopolization: Monopolization in violation of the act requires two elements: The possession of monopoly power and The willful acquisition and maintenance of the power. Exists when one firm has sufficient market power to control prices and exclude competition. Relevant Market: Before court can determine whether firm has dominant market share, it must define the relevant market which consists of two elements: (1) relevant product market, and (2) relevant geographic market. Attempt to Monopolize: Firm actions are scrutinized to determine whether they were intended to exclude competitors and garner monopoly power and had a dangerous probability of success.

Clayton Act of 1914: Aimed at specific practices that substantially reduced competition or could lead to monopoly power Enforced by Justice Department and Federal Trade Commission Price Discrimination Exclusionary Practices Mergers Horizontal Vertical Role of DOJ and FTC www.justice.gov www.ftc.gov Section 2 Price Discrimination: Price discrimination is the charging of different prices to competing buyers for identical goods. Requirements: Seller engaged in interstate commerce, goods of like grade and quality, and goods must be sold to two or more purchasers. Exceptions: Charge of lower price was temporary and in good faith to meet another sellers equally low price. A particular buyers purchases saved the seller costs in producing and selling the good. Defenses: Cost Justification, Meeting the Price of Competition, and Changing Market Conditions. Section 3 Exclusionary Practices: Exclusive Dealing Contracts. A contract under which a seller forbids a buyer to purchase products from the sellers competitors. Prohibited if the effect of the contract is to substantially lessen competition or tend to create a monopoly. Tying Arrangements. The conditioning of the sale of a product on the buyers agreement to purchase another product produced or distributed by the same seller. Section 7 Mergers: Horizontal Mergers occur between firms at the same level in the production and distribution chain. Vertical Mergers occur between firms at different levels in the production and distribution chain.

Section 8 Interlocking Directorates Occurs when an individual serves on the board of directors of two or more competing companies simultaneously. These are prohibited if the two firms meet certain size requirements.

CHAPTER REVIEW: A restraint of trade is any agreement between firms that has the effect of reducing competition in the marketplace. T The basic purpose of antitrust law is to prevent competition. F The Sherman Act prohibits individual anticompetitive behavior that produces or is intended to produce monopoly power. T A horizontal restraint is an anticompetitive agreement between firms operating at different levels of a market. F Price fixing is not a per se violation of Section 1 of the Sherman Act. F A geographical market division between rival firms is not a violation of antitrust laws. F A joint venture is any agreement between two or more buyers or sellers to refuse to engage in any transaction with a particular person or organization. F Monopoly power is not, in and of itself, a violation of antitrust law. T In determining the legality of a merger, a crucial consideration is market concentration. T Making a company give up one or more of its operating functions, as a remedy for antitrust law violations, is known as divestiture. T The Federal Trade Commission Act condemns all forms of anticompetitive behavior not covered under other federal laws. T Beta Corporation may be engaging in conduct that violates the Sherman Act. To bring an action against Beta requires that its conduct have a significant impact on a. international commerce. b. interstate commerce. c. intrastate commerce. d. any of the above. International Products, Inc. (ICI), has exclusive control over the market for its product. ICIs market power is subject to evaluation under a. the Clayton Act. b. the Federal Trade Commission Act. c. the Sherman Act. d. none of the above.

 Three firms control 95 percent of the market for music CDs and tapes in a certain geographic area. They agree to sell their products at the same prices, and exclude a fourth firm (which controls the rest of the market). This is a. a group boycott. b. an exclusive-dealing contract. c. a price-fixing agreement. d. a tying arrangement. USA Computer Corporation requires all distributors of its products to sell the products at specified minimum prices. This resale price maintenance agreement is a. a per se violation of the Sherman Act. b. a violation of the Clayton Act. c. subject to evaluation under the rule of reason. d. not subject to antitrust law. Bestco, Inc., an electronics manufacturer, sells its VCRs to National AV Outlet, a retailer, for $75 each but charges Video Village, a competitive retailer, $100. This may be a violation of a. the Clayton Act. b. the Federal Trade Commission Act. c. the Sherman Act. d. none of the above. International Silicon Corporation, which controls 40 percent of the computer-chip market in the United States, merges with Micro Processors, Inc., which controls 15 percent of the same market. Under the Clayton Act, this merger is a. a violation only if the result more clearly concentrates the market. b. a violation only if the result makes it more difficult for potential competitors to enter the market. c. a violation if the result more clearly concentrates the market and makes it more difficult for potential competitors to enter the market. d. not a violation.

CHAPTER 19 Securities Act 1933: The Securities Act of 1933 governs the initial sale of stocks by businesses. Designed to protect investors from deceptive, unfair and manipulative practices when buying or selling securities. Securities are instruments such as corporate stock or limited partnership interests that evidence ownership or debt. Designed to prohibit fraud Stabilize securities industry by requiring disclosure to investing public

Registration Requirements: Must be filed with the Securities Exchange Commission [SEC] (http://www.sec.gov) before securities can be offered to the public Investors must be provided with a prospectus describes security the issuing corporation investment or risk attached Description of the significant provisions of the registrants offering How the proceeds from the sale will be used Description of the properties and business. Corporation obtains an underwriter to purchase new issue of securities for resale to the public Violations are prosecuted by the Department of Justice as well as private shareholders False statements or material omissions in prospectus or registration statements Exemptions: Bank securities sold before 1933. Commercial paper if maturity date does not exceed 9 months. Charitable organization securities. Securities issued to existing securities holders resulting from reorganization, bankruptcy. Securities issued to finance railroad equipment. Any insurance, endowment, annuity contract or government-issued securities. Securities issued by banks, savings and loan association, farmers' cooperatives. Securities issued to existing securities holders, stock split, dividend (really a transaction exemption). Security Exchange Act 1934: Established the SEC Oversees the resale of securities Regulates markets by maintaining a continuous disclosure system Uncovers undesirable market practices fraud, market manipulation, misrepresentation Securities and Exchange Commission (SEC): An independent regulatory agency Responsibilities include requiring disclosure of facts concerning certain offerings of securities regulating the trade in securities investigating securities fraud Promoting stiffer penalties for insider trading Regulatory changes to address problem of proliferation of hostile takeovers New enforcement options for the financial services industry Rule 10b(5):

 Section 10(b) prohibits the use of any manipulative or deceptive device or contrivance in contravention of rules and regulations of SEC. Rule 10b(5) prohibits the commission of fraud in the connection with the purchase or sale of any security. Insider Trading: Insider Trading is a White Collar Crime An individual who obtains inside information about a corporation that is not public or available to all investors. Section 10(b) prohibits officers and directors from using insider information to get a trading advantage over the general public and shareholders Also covered are persons having access to or receiving information of a nonpublic nature on which trading is based Both criminal and civil liability must have intent to defraud or knowledge of their misconduct State Securities Laws: State securities laws are called blue sky laws. Issuers must comply with federal and state securities laws and states do not allow the same exemptions as federal government. States could require registration or qualification. Uniform Securities Act has been adopted in part by many states. Corporate Governance: Need for Effective Corporate Governance. Attempts at Aligning the Interests of Officers with Shareholders. Corporate Governance and Corporate Law. Importance of Audit and Compensation Committees. Sarbanes-Oxley Act 2002: Goal - to increase corporate accountability CEOs and CFOs personal certify that financial statements and reports are accurate and complete Oversight by Public Company Accounting Oversight Board. Protections for Whistleblowers. Enhanced Penalties. Online Securities Fraud: Use and abuse of internet chat rooms. Pumping and Dumping: buyer pumps the stock and after it rises, dumps it, selling at a higher price. Selling unregistered securities by unregistered stock brokers is a problem.

CHAPTER REVIEW:

 Securities are generally any documents evidencing corporate ownership or debts. T The Securities and Exchange Commission investigates securities fraud. T The U.S. Department of Justice prosecutes criminal violations of federal securities law. T The most common forms of securities are stocks and bonds issued by corporations. T Before a security can be sold to the public, prospective investors must be provided with a prospectus. T The Securities Exchange Act of 1934 provides for the regulation of brokers. T Publicly held companies that make financial forecasts about themselves are never liable to those who rely on the forecasts if they turn out to be wrong. F The Securities Exchange Act of 1934 defines the term inside information. T Section 10(b) of the Securities Exchange Act of 1934 covers only corporate officers, directors, and majority shareholders. F Anyone who receives inside information as a result of an insiders breach of his or her fiduciary duty can be liable under SEC Rule 10b-5. T Doug trades in securities on a regional securities exchange. These trades are subject to regulation by a. the National Securities Markets Improvement Commission. b. the Securities and Exchange Commission. c. the U.S. Department of Justice. d. none of the above. Consumer Industries Corporation (CIC) plans to issue stock for sale to the public. Before the sale can take place, CIC must file a registration statement with the SEC that contains, among other things, a. a description of the accounting firm that audits CIC. b. a description of the security being offered for sale. c. a financial forecast for CICs next fiscal year. d. all of the above. As part of a stock offering for AmCorp, Inc., Bill, AmCorps accountant, intentionally misrepresents material facts in the prospectus. Ed buys the stock unaware of the misrepresentation and suffers a loss. Bill may be subject to a. a fine and imprisonment only. b. damages only. c. a fine, imprisonment, and damages. d. none of the above.