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Employer-Employee Relationship and Business Organization

1. Read the below case and answer questions.

Suppose You're the Judge- The case of the Fired employee

Linda Lewis, vice president of the Acme Trailer Company, enjoyed a wonderful reputation as a capable and trusted financial officer. She, her husband, and their two children lived in a beautiful suburb in a large, comfortable home. The president of a competitor firm, International Trailers Ltd., wanted to hire Lewis for a similar position and offered her an increased salary and many employee benefits. Lewis accepted the offer, sold her home, moved to the city in which her new employee was located, and purchased a home there. She did not have a written contract, but she was told she had a great future with the company and was given a salary of $150,00 per year.
Four months after Lewis joined the company, she was fired because of a downturn in the trailer production business, requiring a scaling back of expenses at International. She sued International for breach of contract.

The Trial
During the trial, Lewis testified about the reputation she had earned while at Acme Trailer and the wonderful life that she and her family had enjoyed. She told of the difficulties involved in moving, the expense of buying new home, and the uprooting of her family. She described the difficulties involved in selling her new home and looking for a new position. An officer of International testified about the recession in the trailer industry and how economic conditions were such that if International failed to cut expenses, it might be forced out of business.

The Arguments at Trial
Lewis's attorney argued that although she did not have a written contract, oral representations made to her had implied that her job would last a long time. That she was going to earn a yearly salary indicated that her employment would, at a minimum, last at least a year. The attorney stressed the difficulties involved in the move and the expenses occurred by the Lewis family, arguing that it would be unfair to terminate Lewis's employment except for cause relating to her activities. The argument was also made that the "employment at will" doctrine was an outmoded and unfair concept and should not be applied based on the facts in this case.
International's attorney argued that the lack of a written contract and the existence in the state in which International was located of the "termination at will" doctrine gave International the right to terminate Lewis's employment at any time for any reason, particularly when economic conditions required cutting of expenses, including termination of the employment of executives with high salaries.

Questions for Discussion
a) Based on the facts of this case, who do you think should prevail, Lewis or International? Why?
b) Are there other facts that would make it easier for the court to decide who should prevail?
c) What factors might a court consider in determining whether the employment at will doctrine should not be applied here?
d) Do you feel that the employment at will doctrine should no longer apply? If so, who should make the change, the legislatures or the courts?

2. Read the below situations and answer questions.

John Smith consults you regarding the following situation. He wants to set up his own HVAC (heating, ventilating & air-conditioning) contracting business, in the next four to six weeks. He is currently employed by a very large tri-state HVAC contractor. He anticipates approximately $10,000 a month in service and sales gross receipts, with a potential for increased business within the same general geographic area he currents works. He anticipates that his customers will be split 50% between residential calls and services as a subcontractor for commercial and residential building contractors. His wife will perform administrative duties and make appointments and his son will work for him full-time as his assistant.

(a) Advise Mr. Smith as to which type of business organization (i.e., Sole partnership, Limited Partnership, Limited Liability Company, Limited Liability Partnership, and other forms of Business Organization such as Joint Venture, Syndicate, and Cooperative) is most appropriate for his newly contemplated business. Explain the reasons for your recommendation.
(b) Also, discuss any other potential legal issues Mr. Smith should consider.
(c) Would your recommendation as to the form of business organization be any different if Mr. Smith's proposed business was an explosive and demolition contractor?

Solution Summary

This solution addresses both case studies on being a judge overseeing a case of the fired employee and also advising John Smith in setting up his own business. Case study questions are answered in detail with explanations.