The Employment Relationship

The Employment Relationship Reading Assignment Chapter 1: Employment Relationship Chapter 4: Privacy, Theft, and Whistle-Blowing Suggested Reading See information below. Key Terms 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. Agency Defamation Employee Employee privacy Employment at will Employment contract Independent contractor Injunction Invasion of privacy Noncompete agreement Nondisclosure agreement Scope of employment Whistle-blowing BHR 3565, Employment Law Course Learning Outcomes for Unit I Upon completion of this unit, students should be able to: 1. Explain the substance of the relationship between employers, employees, and independent contractors. 1.1 Identify the consequences of an employment-at-will relationship. 1.2 Distinguish between employees and independent contractors. 1.3 Describe why employers may need to interfere with employees’ privacy in the workplace. 2. Identify the duties and rights of the parties in an employment contract as well as the liabilities of each in the event of non-compliance. 2.1 Determine the enforceability of non-compete and non-disclosure agreements in employment situations. Unit Lesson The traditional employer-employee relationship is described as employment-at-will, which simply means that the relationship exists as long as both the employer and the employee want it to exist. That is, employment-at-will means that an employee can resign whenever he or she wants to resign for any reason or for no reason. It is often said that an employee must give notice to an employer before the employee resigns, but that idea arises out of the employee hoping for a positive reference from the employer rather than a legal requirement. Employment-at-will also means that an employer can discharge an employee at any time and for any reason or for no reason, as long as the discharge does not constitute discrimination under federal or state law. This traditional employment relationship is sometimes modified by employment contracts. Employment contracts are contracts whose subject is employment and are governed by the rules that apply to contracts in general. That means that an employment contract must be based on an agreement between the employer and the employee, express consideration (the employee promises to work for the employer for a specified period of time and the employer agrees to pay the employee a specified amount of compensation), be made between parties that have the legal capacity to enter into a contract, and be for a legal purpose. The basic difference between an employment relationship based on the employment-at-will doctrine and one based on an employment contract is that the employment relationship based on the employment-at-will doctrine can be terminated by either party at any time and for any legal reason, whereas the employment relationship based on an employment contract can only be terminated according to the provisions of the contract. As with any other contract, the breach of an employment contract entitles the non-breaching party to recover damages that arise because of the breach of the contract. For an employee who is fired in violation of an employment contract, that means the employee can recover any compensation due under the contract that has not been paid. For an employer, that means that an employee who quits in violation of an employment 1 contract may be able to recover the costs of finding, hiring, and training a replacement and even some of the compensation that has already been paid to the employee who breached the employment contract. Most employees do not have the option of working under an employment contract, but there are many high profile examples of employment contracts. Most professional athletes have employment contracts. For instance, in the year that Babe Ruth made the most money for playing professional baseball, 1931, he played under an employment contract with the New York Yankees that paid him a total of $80,000. More recently, until he was suspended, Alex Rodriguez earned $28,000,000 a year under his employment contract with the New York Yankees (Larson, 2013). One of the most important issues that arises in the employment relationship is determining whether a person who works for an employer is actually an employee or whether he or she is an independent contractor. That distinction makes a difference in two important areas: 1. The liability of an employer for the acts of someone who is performing work for the employer may depend on whether the person is an employee or an independent contractor. 2. An employer’s responsibility for withholding and paying income taxes depends on whether the employer is dealing with an employee or an independent contractor (Moran, 2014). The determination of whether someone working for an employer is an employee or an independent contract is really a question of control. That is, the more control that the employer has over the person doing the work, the more likely that the person doing the work will be classified as an employee rather than an independent contractor. For instance, if the employer can require the person doing the work to be on the job at a certain time or for a specified amount of time, that person is likely to be considered to be an employee. If the employer provides the tools that the person doing the work needs to do the job and establishes the procedures for doing the job, the person doing the work will likely be considered to be an employee. Also, the closer the connection between the kind of business that the employer operates and the job that the person is doing, the more likely that person will be considered to be an employee (Moran, 2014). For example, if you own an accounting firm and hire an accountant to prepare tax returns, and you provide the computer and software necessary to prepare tax returns and specify when the person will come to work, when he or she can go to lunch, and when the workday ends, it is pretty clear that the accountant is an employee. On the other hand, if there is an electrical problem in the building where you have your accounting firm and you call an electrician to fix the problem, the electrician will tell you when he or she can come to the office to fix the problem, and the electrician will bring the tools necessary to do the work. In that case, it is clear that the electrician is not one of your employees, but an independent contractor. Of course, the determination of employee or independent contractor can be a more difficult question. For instance, if you hire an accountant on a temporary basis to prepare tax returns during tax season and that accountant works at home and is paid for each tax return prepared rather than on a salary basis or an hourly basis, the determination of whether the accountant is an employee or an independent contractor will have to be determined by considering other factors that indicate the degree of control that you exercise over that accountant. Most employees acquire information about their employers during the course of their employment that might be of benefit to competitors of the employer. Therefore, it is not unusual for employers to have employees sign non-compete and non-disclosure BHR 3565, Employment Law 2 agreements even if the employees are not employed under an employment contract and are employees-at-will (Moran, 2014). A non-compete agreement provides that if an employee voluntarily leaves employment with the employer, that employee cannot go to work for a competitor. These non-compete agreements are generally enforceable if the restrictions on going to work for a competitor are reasonable. What is reasonable depends on the particular circumstance, but it generally means that the geographical areas in which the employee cannot work and the amount of time that the employee cannot work in that geographical area have to have a reasonable relationship to the job that the employee is leaving. For instance, if someone is the news anchor on a local television station and leaves that station, he might reasonably be prohibited from working for another television station in the same market for a year or two by a non-compete agreement (Moran, 2014). A non-disclosure agreement is also not unusual, though it is different from a noncompete agreement. An employee is likely to legitimately acquire information about his or her employer in the course of their employment. A non-disclosure agreement prohibits an employee from disclosing any of that information to another employer when the employee leaves the original employer (Moran, 2014). For example, a few years ago, an executive at Volkswagen left Volkswagen and went to work for Chrysler in a similar position. That executive had signed a non-disclosure agreement when he was an employee of Volkswagen, and Volkswagen, concerned that he would violate the non-disclosure agreement and disclose internal information about Volkswagen to Chrysler, filed a suit asking a court to monitor what the executive did at Chrysler so that Volkswagen could be sure that the executive did not disclose information about Volkswagen. Though courts do not usually undertake to monitor situations for an extended period of time, this court entered an order that the executive could not disclose any information to Chrysler that he had acquired a Volkswagen and set up a program that monitored the activities of the executive for approximately a year. One of the relatively recent issues that has arisen in the employment relationship is the issue of privacy. While employees, like most everyone, have some expectation that they will have a certain amount of privacy, there are legitimate reasons for an employer needing to inquire into some areas that employees might consider to be private. For instance, in hiring employees, employers sometimes require that potential employees allow the employer to conduct a credit check and a background check. Courts have generally said that as long as the credit checks and background checks are reasonably related to the position that a potential employee is applying for and as long as the potential employee agrees to allow the checks, the credit checks and background checks are not an invasion of the potential employee’s privacy (Moran, 2014). Other invasion of employees’ privacy issues can arise once an employee has been hired. For instance, employers often monitor employee telephone calls and email, and sometimes employers conduct surveillance of employees and even search employee work areas. Whether these actions constitute an invasion of employees’ privacy depends on the particular circumstances, but in most cases if the employer’s actions are reasonably related to the employees’ job and if the employer discloses these actions to employees ahead of time (as in the policies provided in an employee handbook), these actions are usually approved by the courts (Moran, 2014). Another relatively recent issue that has arisen in the employment relationship is whistle-blowing. Whistle-blowing occurs when an employee reports to the employer or to federal authorities the unlawful actions of other employees. It is pretty easy to see where problems can arise when there is whistle-blowing, so there are several federal laws that are intended to encourage employees to report unlawful activities related to BHR 3565, Employment Law 3 employment and to protect employees who report unlawful activities, including the following: ? ? ? the Whistleblower Protection Act, which prohibits employers from retaliating against employees who report wrongdoing; the False Claims Act, which encourages employees to report activities that defraud federal or state governments; and the Sarbanes-Oxley Act, which encourages employees to report activities that they reasonably believe violate federal security laws. References Larson, K. (2013). Players worth more today than Babe Ruth. Retrieved from www.blecherreport.com/articles/1539955-players-worth-more-today-thanbabe-ruth Moran, J. J. (2014). Employment law: New challenges in the business environment (6th ed.). Upper Saddle River, NJ: Prentice Hall. Suggested Reading Using the CSU Online Library, read the following articles (ABI/Inform Complete): Barbaris, D. (2014, Jan 14). Rodriguez takes fight to the courts --- Suspended for all of next season, the Yankee sues baseball and its union. Wall Street Journal, Eastern edition. P. A. 24. Smith, A. K. (2013, June). Unsung heroes take the heat. Kiplinger’s Personal Finance, 67(6), 48-53. BHR 3565, Employment Law