Ebook The legal environment of business (7th edition): Part 1

THE

LEGAL
ENVIRONMENT
BUSINESS
OF


This page intentionally left blank


THE

LEGAL
ENVIRONMENT
BUSINESS
OF

A

Critical

Thinking

Approach
SIXTH EDITION

NANCY K.

KUBASEK

BARTLEY A.

BRENNAN

M. NEIL

BROWNE

Boston Columbus Indianapolis New York San Francisco Upper Saddle River
Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto
Delhi Mexico City São Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo


Assistant Vice President, Executive Editor: Stephanie Wall
Editorial Senior Project Manager: Karen Kirincich
Editorial Director: Sally Yagan
Editor in Chief: Donna Battista
Director of Editorial Services: Ashley Santora
Editorial Assistant: Brian Reilly
Director of Marketing: Patrice Jones
Marketing Assistant: Ian Gold
Senior Managing Editor: Cynthia Zonneveld
Project Manager: Carol O’Rourke
Senior Operations Specialist: Diane Peirano
Art Director: Jonathon Boylan
Cover Designer: Jonathon Boylan
Manager, Cover Visual Research & Permissions: Karen Sanatar
Cover Art: Ron Koeber/© Aurora Photos/Alamy
Media Development Manager: Cathi Profitko

Full-Service Project Management: S4Carlisle Publishing Services
Composition: S4Carlisle Publishing Services
Printer/Binder: Webcrafters
Cover Printer: Lehigh-Phoenix Color/Hagerstown
Text Font: 10.5/12 Garamond

Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this
textbook appear on appropriate page within text.

Copyright © 2012, 2009, 2006, 2003, 1999 Pearson Education, Inc., Upper Saddle River, New Jersey
04758. All rights reserved. Manufactured in the United States of America. This publication is protected by
Copyright, and permission should be obtained from the publisher prior to any prohibited reproduction,
storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical,
photocopying, recording, or likewise. To obtain permission(s) to use material from this work, please
submit a written request to Pearson Education, Inc., Permissions Department.

Many of the designations by manufacturers and seller to distinguish their products are claimed as
trademarks. Where those designations appear in this book, and the publisher was aware of a trademark
claim, the designations have been printed in initial caps or all caps.

Library of Congress Cataloging-in-Publication Data
Kubasek, Nancy.
The legal environment of business : a critical thinking approach / Nancy K.
Kubasek, Bartley A. Brennan, M. Neil Brown. — 6th ed.
p. cm.
ISBN-13: 978-0-13-266484-4
ISBN-10: 0-13-266484-4
1. Industrial laws and legislation—United States. 2. Business law—United
States. 3. Trade regulation—United States. I. Brennan, Bartley A. II.
Brown, M. Neil. III. Title.

KF1600.K83 2011
346.7307—dc22
2010054532

10 9 8 7 6 5 4 3 2 1
ISBN 10:
0-13-266484-4
ISBN 13: 978-0-13-266484-4


To the numerous students who appreciate the importance of developing their
critical thinking skills for their personal growth and development
NANCY K. KUBASEK AND M. NEIL BROWNE

In memory of Professor Thomas Dunfee
of the Wharton School of Finance
BARTLEY A. BRENNAN


This page intentionally left blank


Brief Contents
P A R T

O N E

Introduction to the Law and the Legal Environment
of Business 1
1 Critical Thinking and Legal Reasoning 2

2 Introduction to Law and the Legal Environment
of Business 15
3 The American Legal System 33
4 Alternative Tools of Dispute Resolution 70
5 Constitutional Principles 99
6 Cyberlaw and Business 134
7 White-Collar Crime and the Business Community 160
8 Ethics, Social Responsibility, and the Business Manager
9 The International Legal Environment of Business 228

P A R T

202

T W O

Private Law and the Legal Environment of Business 261
10
11
12
13
14
15
16
17
18

The Law of Contracts and Sales—I 262
The Law of Contracts and Sales—II 289
The Law of Torts 309

Product and Service Liability Law 342
Law of Property: Real and Personal 372
Intellectual Property 394
Agency Law 413
Law and Business Associations—I 434
Law and Business Associations—II 453

P A R T

T H R E E

Public Law and the Legal Environment of Business 477
19
20
21
22
23
24
25
26

The Law of Administrative Agencies 478
The Employment Relationship 499
Laws Governing Labor–Management Relations 527
Employment Discrimination 557
Environmental Law 600
Rules Governing the Issuance and Trading of Securities 629
Antitrust Laws 680
Laws of Debtor–Creditor Relations and Consumer Protection 721
APPENDIX A The Constitution Of the United States 763

APPENDIX B Uniform Commercial Code (2000 Official Text), Article 2
GLOSSARY
INDEX

769

783

797

vii


This page intentionally left blank


Contents
PREFACE

xxxi

ACKNOWLEDGMENTS

xxxv

ABOUT THE AUTHORS

xxxvii

P A R T

O N E
Introduction to the Law and the Legal Environment
of Business 1

1

Critical Thinking and Legal Reasoning

2

The Importance of Critical Thinking 2
A Critical Thinking Model 3
United States of America v. Martha Stewart and Peter Bacanovic 4
The Critical Thinking Steps 5
Facts 5
Issue 6
Reasons and Conclusion 6
Rules of Law 6
Ambiguity 7
Ethical Norms 7
Analogies 7
Missing Information 8
Using Critical Thinking to Make Legal Reasoning Come Alive 9
Legal Reasoning 10
Applying the Critical Thinking Approach 13
Assignment on the Internet 14
On the Internet 14
For Future Reading 14

2

Introduction to Law and the Legal Environment
of Business 15
Definition of the Legal Environment of Business 16
Definition of Law and Jurisprudence 17
Natural Law School 18
Positivist School 19
Sociological School 19
American Realist School 20
Critical Legal Studies School 20
Feminist School 20
Law and Economics School 21
Sources of Law 21
The Legislature as a Source of Statutory Law 21
The Judicial Branch as a Source of Case Law 23
The Executive Branch as a Source of Law 25
Administrative Agencies as a Source of Law 25

ix


x

CONTENTS

Classifications of Law 26
Criminal Law and Civil Law 26
Public and Private Law 27
Substantive and Procedural Law 27
Cyberlaw 27

Global Dimensions of the Legal Environment of Business
Summary 28
Review Questions 28
Review Problems 29
Case Problems 29
Thinking Critically about Relevant Legal Issues 31
Assignment on the Internet 31
On the Internet 32
For Future Reading 32

3

The American Legal System

28

33

Jurisdiction 33
Original versus Appellate Jurisdiction 33
Jurisdiction over Persons and Property 34
World-Wide Volkswagen Corp. v. Woodson, District Judge
of Cook County 35
Subject Matter Jurisdiction 37
West Virginia University Board of Governors for and on Behalf
of West Virginia University v. Richard Rodriguez 39
Venue 40
The Structure of the Court System 42
The Federal Court System 42
State Court Systems 42

The Actors in the Legal System and their Relationship
to the Business Community 45
The Attorney 45
The Judge 46
The Jury 48
The Adversary Process 49
Criticisms of the Adversary System 49
Steps in Civil Litigation and the Role of Businesspersons 50
The Pretrial Stage 50
The Trial 55
J.E.B. v. Alabama, ex rel. T.B. 56
Appellate Procedure 60
Class Actions 62
Global Dimensions of the American Legal System 63
Summary 65
Review Questions 65
Review Problems 65
Case Problems 66
Thinking Critically about Relevant Legal Issues 68
Assignment on the Internet 68


CONTENTS

On the Internet 69
For Future Reading 69

4

Alternative Tools of Dispute Resolution

70

Negotiation and Settlement 71
Mediation 72
Selection of a Mediator 72
Common Uses of Mediation 73
Advantages of Mediation 73
Criticisms of Mediation 74
Arbitration 74
Hall Street Associates, L.L.C. v. Mattel, Inc. 75
Methods of Securing Arbitration 76
Southland Corp. v. Keating 77
Ignazio v. Clear Channel Broadcasting, Inc., et al. 80
Selection of an Arbitrator 84
Common Uses of Arbitration 85
Problems with Arbitration 86
Minitrials 87
Early Neutral Case Evaluation 88
Private Trials 88
Summary Jury Trials 89
Court-Annexed Alternative Dispute Resolution 89
Use of Court-Annexed ADR in the State and Federal
Systems 89
Differences between Court-Annexed and Voluntary ADR
The Future of Alternative Dispute Resolution 91
Global Dimensions of Alternative Dispute Resolution 92
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth 92
Summary 93
Review Questions 94

Review Problems 94
Case Problems 94
Thinking Critically about Relevant Legal Issues 97
Assignment on the Internet 97
On the Internet 98
For Future Reading 98

5

90

Constitutional Principles 99
The Constitution 99
Federalism 99
Supremacy Clause 100
Federal Preemption 100
Separation of Powers 101
William Jefferson Clinton v. Paula Corbin Jones 102
The Impact of the Commerce Clause on Business 104
The Commerce Clause as a Source of Federal Authority

104

xi


xii

CONTENTS

Gonzales v. Raich 106
The Commerce Clause as a Restriction on State Authority 108
United Haulers Association, Inc. v. Oneida-Herkimer Solid Waste
Management Authority 110
The Taxing and Spending Powers of the Federal Government 113
The Impact of the Amendments on Business 114
The First Amendment 114
Central Hudson Gas & Electric Corp. v. Public Service
Commission of New York 116
The Fourth Amendment 121
The Fifth Amendment 123
D.A.B.E., Inc. v. City of Toledo 126
The Fourteenth Amendment 128
Summary 128
Review Questions 129
Review Problems 129
Case Problems 130
Thinking Critically about Relevant Legal Issues 131
Assignment on the Internet 132
On the Internet 132
For Future Reading 133

6

Cyberlaw and Business

134

Cyberlaw and Business: How Law Changes as Society Changes 135
The Flexibility of Law 135

Changes in the Ways Courts Function 136
Challenges to the Limits and Powers of Government 137
Janet Reno, Attorney General of the United States, et al.,
Appellants v. American Civil Liberties Union, et al., Appellee 137
Intellectual Property Issues in Cyberspace 141
Patents 141
Trademarks 141
Copyrights 142
A & M Records, Inc. v. Napster, Inc. 143
E-Commerce Issues 145
Privacy 145
Online Marketing 147
Centocor, Inc. (Plaintiff-Appellant) v. Patricia Hamilton
(Respondent) 147
Cybersignatures 148
Employment Law Issues in Cyberspace 149
Privacy versus Employment-at-Will 149
Michael A. Smyth v. the Pillsbury Co. 149
Online Harassment 150
The War against Cybercrime 152
Denial-of-Service Attacks 152
Identity Theft 152
Insider Trading 153
Internet Gambling 154


CONTENTS

Summary 154
Review Questions 155

Review Problems 155
Case Problems 156
Thinking Critically about Relevant Legal Issues
Assignment on the Internet 158
On the Internet 159
For Future Reading 159

7

157

White-Collar Crime and the Business Community

160

Crime and Criminal Procedure 163
Crime 163
Criminal Procedure 164
Distinguishing Features of White-Collar Crime 168
The Corporation as a Criminal 169
Arguments in Support of Corporate Liability 170
Arguments in Opposition to Corporate Liability 171
Imposition of Liability on Corporate Executives 171
United States v. Park 172
Imposition of Liability on Lower-Level Corporate Criminals 175
Factors Encouraging the Commission of White-Collar Crime 175
Sentencing of White-Collar Criminals 176
Common White-Collar Crimes 178
Bribery 179
Violations of Federal Regulations 179

Criminal Fraud 180
United States v. Gray 181
Larceny 183
Embezzlement 183
Computer Crimes 183
Prevention of White-Collar Crime 186
Federal Laws Used in the Fight Against White-Collar Crime 189
The Racketeer Influenced and Corrupt Organizations
Act (RICO) 189
False Claims Act 189
Rockwell International Corp. v. United States 191
Sarbanes-Oxley Act 193
Whistleblower Protection Act 193
State Laws Used in the Fight Against White-Collar Crime 194
Global Dimensions of White-Collar Crime 195
Summary 196
Review Questions 196
Review Problems 196
Case Problems 197
Thinking Critically about Relevant Legal Issues 199
Assignment on the Internet 200
On the Internet 200
For Future Reading 201

xiii


xiv

CONTENTS

8

Ethics, Social Responsibility, and the Business
Manager 202
Definition of Business Ethics and Social Responsibility 204
Business Ethics 204
The Social Responsibility of Business 204
In re Exxon Valdez 205
Theories of Ethical Thought 206
Consequential Theories 206
Deontological Theories 208
Humanist Theories 208
Codes of Ethics 208
Individual Codes of Ethics 208
Corporate Codes of Ethics 210
Industry Codes of Ethics 211
Professional Codes of Ethics 212
Bates v. State Bar of Arizona 214
Schools of Social Responsibility 216
Profit-Oriented School 216
Managerial School 219
Cooper Industries v. Leatherman Tool Group, Inc. 219
Institutional School 220
Professional Obligation School 220
Regulation School 221
Fog Cutter Capital Group v. Securities and Exchange Commission 221
Global Dimensions of Ethics and Social Responsibility 222
Code of Conduct for Transnational Corporations 222
Summary 223

Review Questions 223
Review Problems 223
Case Problems 224
Thinking Critically about Relevant Legal Issues 225
Assignment on the Internet 226
On the Internet 227
For Future Reading 227

9

The International Legal Environment of Business
Dimensions of the International Environment of Business
Political Dimensions 229
Economic Dimensions 230
Cultural Dimensions 231
Corruption and Trade 231
United States v. Kay 232
Legal Dimensions 234
Crosby v. National Foreign Trade Council 237
Methods of Engaging in International Business 238
Trade 238
International Licensing and Franchising 239
Foreign Direct Investment 240

228
229


CONTENTS

In re Union Carbide Corp. Gas Plant Disaster v.
Union Carbide Corp. 241
Risks of Engaging in International Business 243
Expropriation of Private Property 243
Sovereign Immunity Doctrine 244
Keller v. Central Bank of Nigeria 244
Act-of-State Doctrine 245
Republic of the Philippines v. Ferdinand E. Marcos 246
Export and Import Controls 246
Legal and Economic Integration as a Means of Encouraging
International Business Activity 247
The World Trade Organization 249
The European Union 250
North American Free Trade Agreement 254
Global Dispute Resolution 256
Arbitration 256
Litigation 256
Globalization: Hurts or Helps 257
Summary 257
Review Questions 258
Review Problems 258
Case Problems 259
Thinking Critically about Relevant Legal Issues 259
Assignment on the Internet 260
On the Internet 260
For Future Reading 260

P A R T
T W O
Private Law and the Legal Environment of Business 261

10

The Law of Contracts and Sales—I

262

Definition, Sources, and Classifications of Contract Law 263
Definition 263
Sources of Contract Law 263
Classifications of Contracts 264
Fox v. Mountain West Electric 265
Audito v. City of Providence 266
Elements of a Legal Contract 268
Legal Offer 268
Satellite Entertainment Center v. Keaton 269
Legal Acceptance 270
The Private Movie Company, Inc. v. Pamela Lee Anderson et al. 271
Consideration 273
Genuine Assent 275
Stambovsky v. Ackley and Ellis Realty 276
Dissenting Opinion 277

xv


xvi

CONTENTS

Competent Parties 278
Legal Object 279
Moore v. Midwest Distribution, Inc. 280
Contracts That Must Be in Writing 281
Contracts for the Sale of an Interest in Land 281
Contracts to Pay the Debts of Another 281
Contracts Not Performable in One Year 282
Sale of Goods of $500 or More 282
Iacono v. Lyons 282
Nonbusiness Contracts 283
Parol Evidence Rule 283
Third-Party Beneficiary Contracts and Assignment of Rights
Types of Third-Party Beneficiary Contracts 284
Assignment of Rights 284
Summary 285
Review Questions 286
Review Problems 286
Case Problems 286
Thinking Critically about Relevant Legal Issues 287
Assignment on the Internet 288
On the Internet 288
For Future Reading 288

11

The Law of Contracts and Sales—II

289

Methods of Discharging a Contract 290

Discharge by Performance 290
Plante v. Jacobs 290
Discharge by Mutual Agreement 292
Discharge by Conditions Precedent and Subsequent 293
Architectural Systems, Inc. v. Gilbane Building Co. 293
Discharge by Impossibility of Performance 294
Discharge by Commercial Impracticability 294
Facto v. Pantagis 295
Remedies for a Breach of Contract 296
Monetary Damages (“Legal” Remedies) 296
Shirley Parker v. Twentieth Century Fox Film Corp. 297
Arrowhead School District No. 75, Park County,
Montana v. James A. Klyap, Jr. 298
Equitable Remedies 300
Remedies for Breach of a Sales Contract (Goods) 301
Fitl v. Strek 301
E-Contracts 302
E-Signatures 302
The Uniform Computer Information Transaction
Act 303
Global Dimensions of Contract and Sales Law 304
Summary 305
Review Questions 305

284


CONTENTS

Review Problems 305

Case Problems 306
Thinking Critically about Relevant Legal Issues
Assignment on the Internet 307
On the Internet 308
For Future Reading 308

12

307

The Law of Torts 309
The Goals of Tort Law 309
Damages Available in Tort Cases 310
Compensatory Damages 310
Nominal Damages 311
Punitive Damages 311
BMW of North America, Inc. v. Gore, Jr. 312
Classifications of Torts 318
Intentional Torts 318
Intentional Torts against Persons 318
Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc. 321
Ellen Johnston v. One America Productions, Inc. 325
Intentional Torts against Property 329
Intentional Torts against Economic Interests 329
Negligent Torts 331
Elements of Negligence 331
Defenses to Negligence 333
Vicki Lynn Shultz v. Cheney School District No. 360 335
Strict Liability Torts 336
Global Dimensions of Tort Law 336

Summary 336
Review Questions 337
Review Problems 337
Case Problems 338
Thinking Critically about Relevant Legal Issues 340
Assignment on the Internet 340
On the Internet 341
For Future Reading 341

13

Product and Service Liability Law 342
Theories of Recovery in Product Liability Cases 343
Negligence 343
Donna S. Riegel v. Medtronic, Inc. 350
Strict Liability in Contract for Breach of Warranty
Williams v. Braum Ice Cream Store, Inc. 354
Strict Liability in Tort 357
Welge v. Planters Lifesavers Co. 358
Susan Calles v. Scripto-Tokai Corp. et al. 360
Liability to Bystanders 363
Market Share Liability 363

352

xvii


xviii

CONTENTS

Service Liability 364
Accountants’ Liability 365
Global Dimensions of Product Liability Law 366
Summary 367
Review Questions 368
Review Problems 368
Case Problems 368
Thinking Critically about Relevant Legal Issues 370
Assignment on the Internet 371
On the Internet 371
For Future Reading 371

14

Law of Property: Real and Personal

372

Real Property 373
Definition of Real Property 374
Extent of Ownership 374
Interests in Real Property 374
Fee Simple Absolute 375
Conditional Estate 375
Life Estate 375
Future Interest 375
Leasehold Estates 376
Easements 376

License 376
Co-Ownership 377
Condominiums and Cooperatives 377
Burton Stevens v. Elk Run Homeowners’ Association, Inc. 378
Voluntary Transfer of Real Property 379
Execution 380
Delivery 382
Acceptance 382
Recording 382
Involuntary Transfer of Real Property 382
Adverse Possession 382
Condemnation 382
Susette Kelo et al., Petitioners, v. City of New London,
Connecticut, et al. 384
Restrictions on Land Use 385
Restrictive Covenants 386
Zoning 387
Other Statutory Restrictions on Land Use 387
Personal Property 388
Voluntary Transfer of Personal Property 388
Involuntary Transfers of Personal Property 388
Bailments 389
Global Dimensions of Property Law 389
Summary 390
Review Questions 390
Review Problems 391


CONTENTS

Case Problems 391
Thinking Critically about Relevant Legal Issues
Assignment on the Internet 393
On the Internet 393
For Future Reading 393

15

Intellectual Property

392

394

Introduction to Intellectual Property 394
Trademarks 394
Toys “R” Us, Inc., v. Canarsie Kiddie Shop, Inc. 395
Trade Dress 398
Federal Trademark Dilution Act of 1995 398
Victor Moseley and Kathy Moseley et al., dba Victor’s Little Secret v.
V Secret Catalogue, Inc. et al. 400
Trade Secrets 401
Patents 401
Copyrights 402
Fair Use Doctrine 403
Zomba Enterprises, Inc.; Zomba Songs, Inc., Plaintiffs-Appellees v.
Panorama Records, Inc., Defendant-Appellant 403
Copyrights in the Digital Age 406
RealNetworks, Inc. v. DVD Control Copy Association,
Inc., et al. 407

Global Dimensions of Intellectual Property
Law 408
Summary 409
Review Questions 409
Review Problems 410
Case Problems 410
Thinking Critically about Relevant Legal Issues 411
Assignment on the Internet 412
On the Internet 412
For Future Reading 412

16

Agency Law

413

Definition and Types of Agency Relationships 414
Definition of Agency 414
Types of Agency Relationships 414
Alberty-Vélez v. Corporación de Puerto Rico 416
Creation of an Agency Relationship 418
Expressed Agency or Agency by Agreement 418
Agency by Implied Authority 418
Penthouse International v. Barnes 419
Agency through Ratification by Principal 420
Agency by Estoppel or Apparent Authority 420
Duties of Agents and Principals 420
Principal’s Duties to Agent 420
Agent’s Duties to Principal 421

xix


xx

CONTENTS

Cousins v. Realty Ventures, Inc. 421
Gossels v. Fleet National Bank 423
Principal’s and Agent’s Liability to Third Parties 424
Contractual Liability 424
McBride v. Taxman Corp. 424
E-Commerce: Intelligent Agents 425
Liability of Disclosed, Partially Disclosed Principals,
and Undisclosed Principals 426
Liability of Undisclosed Principal 426
Tort Liability 426
Tort Liability and Negligence 426
Criminal Liability 427
Termination of the Principal–Agent Relationship 427
Termination by Agreement 427
Termination by Operation of Law 427
Gaddy v. Douglass 428
Global Dimensions of Agency Law 429
Japan 429
European Union 429
U.S. Agents Abroad 430
Summary 430
Review Questions 431

Review Problems 431
Case Problems 432
Thinking Critically about Relevant Legal Issues 432
Assignment on the Internet 433
On the Internet 433
For Future Reading 433

17

Law and Business Associations—I

434

Factors Influencing a Business Manager’s Choice of
Organizational Form 436
Some Common Forms of Business Organization in the
United States 436
Sole Proprietorships 437
General Partnerships 437
In re KeyTronics 439
Enea v. Superior Court of Monterey County 440
Limited Partnerships and Limited Liability Limited
Partnerships 444
Specialized Forms of Business Associations 445
Joint Stock Company 445
Syndicate 445
Joint Venture 445
Franchising 446
Global Dimensions of Business Associations 447
Summary 449

Review Questions 449


CONTENTS

Review Problems 450
Case Problems 450
Thinking Critically about Relevant Legal Issues
Assignment on the Internet 452
On the Internet 452
For Future Reading 452

18

Law and Business Associations—II

451

453

The Corporation 453
Classification of Corporations 454
Closely Held Corporation 454
Publicly Held Corporation 455
Multinational or Transnational Corporation 455
Subchapter S Corporation 455
Professional Corporation 455
Nonprofit Corporation 456
Creation of Corporations 456
Financing of Corporations 456

Debt Financing 456
Equity Financing 457
Consideration 459
Operation of Corporations 460
The Role of the Shareholders 460
The Role of the Board of Directors 462
The Role of the Officers and Managers 462
Fiduciary Obligations of Directors, Officers, and Managers
Beam v. Stewart 464
Smith v. Van Gorkom 466
Limited Liability Companies 469
The Uniform Limited Liability Act 469
LLC Characteristics 469
Creative Resource Management Inc. v. Soskin 469
Creating a Limited Liability Company 470
Duration of the LLC 471
Financing of the LLC 471
Control Considerations 471
Tax Ramifications 471
Global Dimension of Corporations: A “Big Fat Greek”
Bailout II 471
Summary 472
Review Questions 472
Review Problems 473
Case Problems 473
Thinking Critically about Relevant Legal Issues 474
Assignment on the Internet 475
On the Internet 475
For Future Reading 476

463

xxi


xxii

CONTENTS

P A R T
T H R E E
Public Law and the Legal Environment of Business 477

19

The Law of Administrative Agencies 478
Introduction to Administrative Law and Administrative
Agencies 479
Administrative Law 479
Administrative Agencies 480
Creation of Administrative Agencies 481
Functions of Administrative Agencies 482
Rulemaking 482
Massachusetts v. EPA 484
Adjudication 485
Fox Television Stations, Inc. v. Federal Communications
Commission 489
Administrative Activities 490
Limitations on Administrative Agencies’ Powers 490
Statutory Limitations 490

Institutional Limitations 490
State and Local Administrative Agencies 492
Vonage Holdings Corp. v. Minnesota Public Utilities
Commission 493
Global Dimensions of Administrative Agencies 494
Summary 494
Review Questions 494
Review Problems 495
Case Problems 495
Thinking Critically about Relevant Legal Issues 497
Assignment on the Internet 497
On the Internet 498
For Future Reading 498

20

The Employment Relationship

499

Wage and Hour Laws 500
Unemployment Compensation 502
Cassandra Jenkins v. American Express Financial Corp. 504
Consolidated Omnibus Budget Reconciliation Act of 1985 505
Worker’s Compensation Laws 505
Coverage 505
Recoverable Benefits 506
The Claims Process 507
Benefits of the Worker’s Compensation System 507
The Family and Medical Leave Act of 1993 508

Major Provisions 508
Rachael Schaar, Appellant v. Lehigh Valley Health Services, Inc.;
Lehigh Valley Physicians Business Services, Inc. 509
Remedies for Violations of the FMLA 511


CONTENTS

The Occupational Safety and Health Act of 1970 511
Occupational Safety and Health Administration 512
Occupational Safety and Health Review Commission 514
National Institute for Occupational Safety and Health 516
Implementation of the OSH Act 516
Employee Privacy Rights 516
Electronic Monitoring and Communication 516
Fraser v. Nationwide Mutual Insurance Co. 517
Drug Testing 518
Other Testing 520
Global Dimensions of the Employment Relationship 521
Summary 522
Review Questions 522
Review Problems 522
Case Problems 523
Thinking Critically about Relevant Legal Issues 525
Assignment on the Internet 525
On the Internet 526
For Future Reading 526

21

Laws Governing Labor–Management Relations 527
Structure of the Primary U.S. Labor Legislation and the Mechanisms
for its Enforcement 529
The Wagner Act of 1935 529
The Taft–Hartley Act of 1947 530
The Landrum–Griffith Act of 1959 530
The National Labor Relations Board 531
Labor Organizing 536
Board Rules 536
Unfair Labor Practices by Employers 537
Progressive Electric, Inc. v. National Labor Relations Board 538
Gaetano & Associates, Inc. v. National Labor Relations Board 541
Unfair Labor Practices by Employees 542
Organizing the Appropriate Unit 543
Brown University and International Union, United Automobile,
Aerospace and Agricultural Implement Workers of America,
UAW, AFL-CIO, Petitioner 544
The Collective Bargaining Process 545
Subjects of Bargaining 546
Strikes, Boycotts, and Picketing 547
Strikes 548
Boycotts 549
Picketing 549
Global Dimensions of Labor–Management Relations 550
Summary 551
Review Questions 551
Review Problems 551
Case Problems 552

xxiii

xxiv

CONTENTS

Thinking Critically about Relevant Legal Issues
Assignment on the Internet 555
On the Internet 555
For Future Reading 556

22

Employment Discrimination

554

557

The Employment-at-Will Doctrine 558
Constitutional Provisions 560
The Civil Rights Acts of 1866 and 1871 560
Applicability of the Acts 560
The Equal Pay Act of 1963 561
Equal Work 562
Defenses 562
Remedies 563
The Civil Rights Act of 1964, as Amended (Title VII), and the Civil
Rights Act of 1991 563
Applicability of the Act 564

Proof in Employment Discrimination Cases 564
Teresa Harris v. Forklift Systems, Inc. 568
Statutory Defenses 570
Desert Palace, Inc., dba Caesar’s Palace Hotel & Casino v.
Catharina Costa 572
Protected Classes 573
Enforcement Procedures 576
Remedies 579
Lilly Ledbetter Fair Pay Act of 2009 579
The Age Discrimination in Employment Act of 1967 580
Applicability of the Statute 581
Proving Age Discrimination 581
Jones v. National American University 582
Statutory Defenses 583
Enforcement Procedures 584
Remedies under ADEA 585
The Rehabilitation Act of 1973 585
The Americans with Disabilities Act of 1991 586
Covered Individuals 586
Enforcement Procedures 588
Remedies 588
Affirmative Action 588
Global Dimensions of Employment Discrimination Legislation 593
Summary 594
Review Questions 594
Review Problems 595
Case Problems 595
Thinking Critically about Relevant Legal Issues 597
Assignment on the Internet 598
On the Internet 598

For Future Reading 598