MGMT 4890 EXAM Questions with solved
solutions
Freedom to contract - ANSWER>>Employment relationship is a contract: the
exchange of labor for compensation
Most private-sector employment relationships are "at-will" agreements (more on
this in Ch. 2)
An employee may choose to work or not to work for a given employer
An employer may choose to hire or not to hire a given applicant, and either party
may terminate the relationship at any time, with some exceptions
Congress and states enact laws when - ANSWER>>they believe that the employee
is not on equal bargaining footing with the employer
Congress and states enact laws to - ANSWER>>Minimum wage, overtime, safety
and health
Collective bargaining rules
Refrain from using certain criteria (race, gender) to arrive at specific employment
decisions
Exceptions to at-will doctrine
Opponent view - ANSWER>>The market will work to encourage employers'
rational, non-biased behavior
Employers should have freedom to make business decisions
Proponent view - ANSWER>>Human beings do not always (usually?) act rationally
Discrimination is unjust and continues on conscious and unconscious levels.
People can tend to appreciate similarity, and distrust difference and The
Unknown.
Market imperfections: biased firms can remain competitive while discriminating
Social contract: Best angels stand for equality of opportunity
,Employee - ANSWER>>Traditional law of master and servant → law of agency
Employee serves employer/principal's interests as its agent, according to
instructions (under its control)
Independent contractor - ANSWER>>Person who contracts with a principal to
perform a task according to his or her own methods
The principal does not have right to exercise controlover the physical details of
the work
Discrimination: Title VII applies to Employees, not to Independent Contractors -
ANSWER>>Employer payroll deductions
Employee → Employer responsible for deductions
Independent Contractor → responsible for their owntaxes, including deductions
Benefits
Not required, but Employee eligible to receive them
Independent Contractor → no access to Employerbenefit
Why Use Ind. Contractors? - ANSWER>>Specialized skills or Intermittent need
Seasonality
Cost factors
No overtime
Avoids work-related expenses (e.g., insurance)
Avoids Overhead - pay-for-production, not time
Liability of contractor for mistakes
Costs of Miss-Classification - ANSWER>>Inaccurate classification of workers is a
violation of
Federal tax laws
The National Labor Relations Act of 1935
The Fair Labor Standards Act of 1938
Employee Retirement Income Security Act
Social Security Act
,State worker's compensation and unemployment compensation laws
CA: willful miss-classification subject to severe penalties
The fines for each violation are substantial
Indep't. Contractors: Safe Harbor (IRS) - ANSWER>>The business must have never
treated the worker as an employee for the purposes of employment taxes for any
period
All federal tax returns with respect to this worker were filed consistent with the
worker being an independent contractor
The company has treated all those in positions substantially similar to that of this
worker as independent contractors
The company has a reasonable basis for treating the worker as an independent
contractor
Definitions of "Employee" (1) - ANSWER>>Legislative definitions are circular,
unhelpful to
classification process
Courts use tests to analyze workers in context
Common-law agency test: critical factor - the right to
control (exercised or not)
Economic realities test: critical factor-- whether a
worker is economically dependent or is in business
for her/himself
Case: Murray v. Principal Financial Group
Case: Juino v. Livingston Fire District 5
Definitions of "Employee" (2) - ANSWER>>Tax penalties for miss-classification
onerous
IRS institutional preference for employee status
Taxpayer may apply to IRS for Determination
IRS 20-Factor Analytical Tool
Elements that reflect control or independence
Useful as a general guide, but not a "tally" out of 20
, See Opening Scenario 3
Contingent or temporary workers - ANSWER>>Often supplied by 'temp' or staffing
agency
Same classification issues (usually employee)
Staffing firms and clients: Joint Employers? - ANSWER>>Staffing firms and their
clients may have joint liability for workers
Contract with Agency needs clarity re employer duties
Precautions during engagement to reduce risk of joint liability
Definition of "Applicant" - ANSWER>>To fulfill their purpose, some regulations
cover certain prospective employees (e.g., Title VII).
To be covered as an "Applicant:"
Person submits expression of interest, reflecting basic qualifications for a posted
position;
Employer considers person for employment in a particular position;
Person does not remove him/herself from selection process or signify disinterest
Management Considerations (risk reduction) - ANSWER>>Classification stakes are
high: a written
document can help identify the nature of the worker's relationship, but the "duck
test" rules
Independent contractor is best paid on the basis of results rather than time
Minimum-necessary training should be provided to an independent contractor
If independent contractor requires assistance, s/he should supply it
Definition of "EmployER - ANSWER>>Important to recognize that entity must be
an "Employer" for many regulations to attach.
Issues may arise when:
an entity claims to be a private membership club
the entity is a multinational company
solutions
Freedom to contract - ANSWER>>Employment relationship is a contract: the
exchange of labor for compensation
Most private-sector employment relationships are "at-will" agreements (more on
this in Ch. 2)
An employee may choose to work or not to work for a given employer
An employer may choose to hire or not to hire a given applicant, and either party
may terminate the relationship at any time, with some exceptions
Congress and states enact laws when - ANSWER>>they believe that the employee
is not on equal bargaining footing with the employer
Congress and states enact laws to - ANSWER>>Minimum wage, overtime, safety
and health
Collective bargaining rules
Refrain from using certain criteria (race, gender) to arrive at specific employment
decisions
Exceptions to at-will doctrine
Opponent view - ANSWER>>The market will work to encourage employers'
rational, non-biased behavior
Employers should have freedom to make business decisions
Proponent view - ANSWER>>Human beings do not always (usually?) act rationally
Discrimination is unjust and continues on conscious and unconscious levels.
People can tend to appreciate similarity, and distrust difference and The
Unknown.
Market imperfections: biased firms can remain competitive while discriminating
Social contract: Best angels stand for equality of opportunity
,Employee - ANSWER>>Traditional law of master and servant → law of agency
Employee serves employer/principal's interests as its agent, according to
instructions (under its control)
Independent contractor - ANSWER>>Person who contracts with a principal to
perform a task according to his or her own methods
The principal does not have right to exercise controlover the physical details of
the work
Discrimination: Title VII applies to Employees, not to Independent Contractors -
ANSWER>>Employer payroll deductions
Employee → Employer responsible for deductions
Independent Contractor → responsible for their owntaxes, including deductions
Benefits
Not required, but Employee eligible to receive them
Independent Contractor → no access to Employerbenefit
Why Use Ind. Contractors? - ANSWER>>Specialized skills or Intermittent need
Seasonality
Cost factors
No overtime
Avoids work-related expenses (e.g., insurance)
Avoids Overhead - pay-for-production, not time
Liability of contractor for mistakes
Costs of Miss-Classification - ANSWER>>Inaccurate classification of workers is a
violation of
Federal tax laws
The National Labor Relations Act of 1935
The Fair Labor Standards Act of 1938
Employee Retirement Income Security Act
Social Security Act
,State worker's compensation and unemployment compensation laws
CA: willful miss-classification subject to severe penalties
The fines for each violation are substantial
Indep't. Contractors: Safe Harbor (IRS) - ANSWER>>The business must have never
treated the worker as an employee for the purposes of employment taxes for any
period
All federal tax returns with respect to this worker were filed consistent with the
worker being an independent contractor
The company has treated all those in positions substantially similar to that of this
worker as independent contractors
The company has a reasonable basis for treating the worker as an independent
contractor
Definitions of "Employee" (1) - ANSWER>>Legislative definitions are circular,
unhelpful to
classification process
Courts use tests to analyze workers in context
Common-law agency test: critical factor - the right to
control (exercised or not)
Economic realities test: critical factor-- whether a
worker is economically dependent or is in business
for her/himself
Case: Murray v. Principal Financial Group
Case: Juino v. Livingston Fire District 5
Definitions of "Employee" (2) - ANSWER>>Tax penalties for miss-classification
onerous
IRS institutional preference for employee status
Taxpayer may apply to IRS for Determination
IRS 20-Factor Analytical Tool
Elements that reflect control or independence
Useful as a general guide, but not a "tally" out of 20
, See Opening Scenario 3
Contingent or temporary workers - ANSWER>>Often supplied by 'temp' or staffing
agency
Same classification issues (usually employee)
Staffing firms and clients: Joint Employers? - ANSWER>>Staffing firms and their
clients may have joint liability for workers
Contract with Agency needs clarity re employer duties
Precautions during engagement to reduce risk of joint liability
Definition of "Applicant" - ANSWER>>To fulfill their purpose, some regulations
cover certain prospective employees (e.g., Title VII).
To be covered as an "Applicant:"
Person submits expression of interest, reflecting basic qualifications for a posted
position;
Employer considers person for employment in a particular position;
Person does not remove him/herself from selection process or signify disinterest
Management Considerations (risk reduction) - ANSWER>>Classification stakes are
high: a written
document can help identify the nature of the worker's relationship, but the "duck
test" rules
Independent contractor is best paid on the basis of results rather than time
Minimum-necessary training should be provided to an independent contractor
If independent contractor requires assistance, s/he should supply it
Definition of "EmployER - ANSWER>>Important to recognize that entity must be
an "Employer" for many regulations to attach.
Issues may arise when:
an entity claims to be a private membership club
the entity is a multinational company
