Business Law (part 28)

Employer and Employee Relations

(part C)

 by

 Charles Lamson

Liabilities of the Employer to Third Parties

An employer has liability under certain circumstances for injuries that employees cause to third parties. The theory of respondeat superior imposes liability on an employer for torts (wrongful acts or infringement of rights leading to civil legal liability) caused by employees. The employer is liable for personal injury as well as property damage.

To be liable, the employee must have committed the injury in the course of employment. An employee, who, without any direction from the employer, injures a third party and causes injury not as a result of the employment, has personal liability, but the employer does not. The employer has liability, however, if it ordered the act that caused the injury or had knowledge of the act and assented to it. The employer also has liability for the torts of employees caused by the employer's negligence and not enforcing safe working procedures; not providing safe equipment, such as trucks; or not employing competent employees. In rare cases the employer is liable for intentional torts when the conduct constitutes a risk attributable to the employer's business.

Employees Duties to the Employer

The employee owes certain duties to the employer. Failure to comply with these duties may result in discharge. An employee's duties include:

1. Job performance
2. Business confidentiality
3. Granting of right to use inventions 

Job Performance

The duties required by the job must be performed faithfully and honestly and to advance the employer's interests. In skilled positions, the worker must perform the task with ordinary skill.

Business Confidentiality

An employee has a duty of confidentiality regarding certain business matters. Trade secrets or other confidential business information must not be revealed.

Inventions

In the absence of an express or implied agreement to the contrary, inventions belong to the employee who devised them, even though the time and property of the employer were used in their discovery, provided that the employee was not employed for the express purpose of inventing the things or the processes that were discovered.

If the invention is discovered during working hours and with the employer's material and equipment, the employer has the right to use the invention without charge in the operation of the business. If the employee has obtained the patent for the invention, the employer must be granted a non-exclusive license to use the invention without the payment of royalty. This shop right of the employer does not give the right to make and sell machines that embody the employees invention; it only entitles the employer to use the invention in the operation of the plant.

When an employer employs a person to secure certain results from experiments to be conducted by that employee, the courts hold that the inventions equitably belong to the employer. Courts base this result on a trust relation or an implied agreement to make an assignment.

In any case, an employee may expressly agree that inventions made during employment will be the property of the employer. Such contracts must be clear and specific, or else courts normally rule against the employer. The employee may also agree to assign to the employer inventions made after the term of employment.

Federal Social Security Act

The federal Social Security Act has four major provisions:

1. Old-age and survivors' insurance
2. Assistance to persons in financial need
3. Unemployment compensation
4. Disability and Medicare benefits

Old Age and Survivors' Insurance

The Social Security Act provides payments to the dependents of covered workers who died before the age of retirement. This part constitutes the survivors' benefits. If workers live to a specified age and retire, they and their spouses draw retirement benefits. This part constitutes the old-age benefits. Both parts are called insurance because they constitute risks that could be insured against by life insurance companies. The survivors' insurance covers the risk of the breadwinner's dying and leaving dependents without a source of income. Old age benefits cover the risk of outliving one's savings after retirement.

Who is Covered? The old-age and survivors insurance provisions of the Social Security Act cover practically everyone. Employees in state and local governments, including public school teachers, may be brought under the coverage of the act by means of agreements between the state and the federal government.

This provision of the act also covers farmers, professional people such as lawyers, and self-employed business people. The act does not cover certain types of work of close relatives, such as a parent for a child, work by a child under 21 for parents, and employment of a spouse by a spouse.

Eligibility for Retirement Benefits. To be eligible for retirement benefits, one must meet these requirements:

1. Be fully insured (40 quarters or the equivalent of 10 years) at the time of retirement.
2. Be 62 years of age or older.
3. Apply for retirement benefits after reaching the age of retirement. To be entitled to the maximum retirement benefits, one must wait until at least age 65 to apply for them. 

Eligibility for Survivors Benefits. The family of a worker who dies while fully insured or currently insured at the time of death has a right to survivors benefits. Currently insured means the person had worked at least six quarters in the 13-quarter period. ending with death.

Assistance to Persons in Financial Need

People over 65 who have financial need may be eligible for federal supplemental security income payments. These monthly payments go to blind or disabled people in financial need. No one contributes specifically to this system based only on need.

Unemployment Compensation

In handling unemployment compensation, the federal government cooperates with the state, which set up their own rules, approved by the federal government, for the payment of unemployment benefits. The states, not the federal government, make payments of unemployment compensation.

The unemployment compensation laws of the various states differ, although they tend to follow a common pattern. They all provide for raising funds by Levies upon employers. The federal government pays the cost of running the programs.

State unemployment compensation laws apply in general to workers in commerce and industry. Agricultural workers, domestic servants, government employees, and employees of nonprofit organizations formed and operated exclusively for religious, charitable, literary, educational, scientific, or humane purposes may not be included.

To be eligible for benefits, a worker is generally must meet the following requirements:

1. Be available for work and registered at an unemployment office
2. Have been employed for a certain length of time within a specified period in an employment covered by the law
3. Be capable of working
4. Not have refused reasonably suitable employment
5. Not be self-employed
6. Not be out of work because of a strike or lockout still in progress or because of voluntary leaving a job without cause
7. Have served the required waiting period.

Disability and Medicare Benefits

The government makes monthly cash benefits, called disability insurance benefits, to disabled persons under the age of 65 and their families. A disabled person is someone unable to engage in any substantial gainful activity because of a medically determinable physical or mental impairment expected to end in death or that has lasted or will last continually for 12 months.

Medicare is insurance designed to help pay a large portion of personal health care costs. Virtually everyone age 65 and over may be covered by this contributory hospital and medical insurance plan. The program covers only specified services.

Taxation to Finance the Plan

To pay this life insurance and the annuity insurances benefits of the Social Security Act, both the employer and the employee pay a payroll tax (FICA) equal percentage of all income earned in any one year up to a specified maximum. The maximum income and the rate may be changed at any session of Congress. A payroll tax finances the unemployment compensation part of the act. In most states the employer bears this entire tax. The assistance to persons in need is paid for by general taxation. No specific tax is levied to meet these payments. Disability and Medicare benefits are funded from a combination of four sources: FICA, a Medicare tax on people who are not covered by the old age and survivors insurance, premiums paid by the people covered, and the general federal revenue. 

Name	Resources	Web Address
The Outsourcing Institute	The Outsourcing Institute provides general information on outsourcing, including the hiring of independent contractors.	www.outsourcing.com
Avoiding Booby Traps in Drafting Employee Manuals	Avoiding Booby Traps in Drafting Employee Manuals, by Attorney James R. Macy, provides basic advice for drafting employment manuals.	www.abanet.org/genpractice/compleat/w96man.html
U.S. Department of Labor	The U.S. Department of Labor provides information and statistics, at the federal level, for workplace and agency issues.	www.dol.gov

*SOURCE: LAW FOR BUSINESS, 15TH ED., 2005, JANET E. ASHCROFT, J.D., PGS. 336-342*

end

Name

Resources

Web Address 

The Outsourcing Institute

The Outsourcing Institute provides general information on outsourcing, including the hiring of independent contractors.

www.outsourcing.com

Avoiding Booby Traps in Drafting Employee Manuals

Avoiding Booby Traps in Drafting Employee Manuals, by Attorney James R. Macy, provides basic advice for drafting employment manuals.

www.abanet.org/genpractice/compleat/w96man.html

U.S. Department of Labor

The U.S. Department of Labor provides information and statistics, at the federal level, for workplace and agency issues.

www.dol.gov