Business law

bus_law_topics_.pdf

Security 72) Why were the Securities Acts passed, given that ordinary contract law provides many remedies for persons who have been the victim of fraud, and other such crimes? Answer: One reason is to prevent the fraud in the first place through the liability provisions. A second is that many injured investors could not prove an ordinary fraud case, and many would not bother to file one because of the size of any potential recovery. Diff: 1 Topic: Liability Provisions of the Securities Exchange Act of 1934 Skill: Ethics and Policy 73) Is liability under Section 11 of the Securities Act of 1933 too broad? Should parties be liable even without scienter? Does the due diligence defense put too much of the burden of proof on defendants? Answer: The result of Section 11 is that often the burden of proof is on the defendant to prove proper conduct. Where the proof is not available, the defendant will lose the suit. Diff: 1 Topic: Liability Provisions of the Securities Exchange Act of 1934 Skill: Ethics and Policy

74) Are the rules on short-swing profits under Section 16(b) of the Securities Exchange Act of 1934 too restrictive or not restrictive enough? Merely because one is a statutory insider, is it proper to limit his or her ability to make a profit on the company's stock? Alternatively, should the 6-month period be longer? What is the theory behind making the profits belong to the corporation? Answer: One rationale for the law is the difficulty of proving who had inside information at any particular time. The law assumes that the insiders do have inside information, a reasonable assumption. One idea behind the corporation having a claim to the profits is that the insiders should be devoting their efforts toward the long-term health of the company, not making profits in the short term buying and selling the company's stock. Diff: 2 Topic: Liability Provisions of the Securities Exchange Act of 1934 Skill: Ethics and Policy 75) For an investment contract, why is one of the requirements for the contract to be classified as a security that the arrangement be one where the profits are made through the efforts of others? Answer: Where one must put her own efforts in to make a profit, such as a partner in a general partnership, one will investigate the opportunity more thoroughly. It is simply too easy to get investors to invest in a scam when the investor is promised great returns with no effort put in. Lastly, when one does the work herself, she has more control over the outcome. Diff: 2 Topic: Liability Provisions of the Securities Exchange Act of 1934 Skill: Ethics and Policy

76) John operates a sailboat charter service in the U.S. Virgin Islands. He currently has a fleet of 10 boats and would like to have a larger fleet, but would have to obtain additional investors, which he does not want to do. He is considering having investors buy sailboats, which he would maintain and operate as part of his charter fleet. He would enter into a contract that would sell the boat to the investor and provide for the investor to pay John a monthly fee for the maintenance of the boat, and would provide for the sharing of profits between John and the investor. Discuss whether this investment is a security under the 1933 and 1934 Securities Acts. Answer: An investment contract in which an investor expects to make a profit off the efforts of others is a security. Here, all the efforts are undertaken by John, thus this arrangement is likely a security. Diff: 2 Topic: Definition of a Security Skill: Factual Application

77) Wondercures, Inc. is a drug research and manufacturing firm. Wondercures is currently a privately held corporation. The owners of Wondercures believe that they could greatly increase the company's profitability with an infusion of new capital. This would have to come by issuing stock to additional investors. The owners of Wondercures believe that they would need about $20 million in order to carry out their expansion plans. Discuss the options available to Wondercures, and the advantages and disadvantages of each. Answer: A regular registration is expensive, but would be more attractive to investors because the stock acquired would not be subject to restrictions. Regulation A would not be available because it is limited to $5 million in a 12-month period. If Wondercures does 80 percent of its business in one state, it could qualify for the intrastate exemption, but would be restricted to issuing stock to investors in that state. Wondercures would not qualify for the small offering exemption. Wondercures could make use of a private placement. This would incur smaller transaction costs compared to a regular registration, but the stock would be restricted from resale. This would make the stock less appealing to many potential investors. Another disadvantage to the private placement is that it can be offered to only 35 non-accredited investors. Diff: 3 Topic: Definition of a Security Skill: Factual Application 78) Mary wants to invest in some rental property near a major university. Mary approaches Sally and proposes that Sally invest half the down payment in an apartment complex. Mary would devote the majority of the efforts in managing the apartments. Sally would devote some time to managing the complex and would receive 30 percent of the profits. They plan to operate the complex as a partnership. Is Sally's investment in the apartment complex a security under the 1933 and 1934 Securities Acts? Answer: Because Sally is putting her own efforts into the enterprise and operating it as a general partnership, it would not be classified as a security. Diff: 2 Topic: Definition of a Security Skill: Factual Application

79) Harmon, Inc. is a manufacturer of auto parts and wishes to issue new stock to raise capital. Harmon is incorporated and does all of its business in Indiana. Harmon would like to offer its stock regionally, but is flexible depending on the circumstances. There are also several wealthy, sophisticated individuals who would like to purchase Harmon stock. Discuss the methods available to issue Harmon stock exempt from SEC registration. Answer: Harmon could use the intrastate offering exemption, but would be limited to selling to investors in Indiana. There is no dollar limit. Harmon could also use a private placement, which would also have no dollar limit, but the offering could be made only to a maximum of 35 unaccredited investors, although there is no limit on the number of accredited investors. Under rule 504, Harmon could issue up to $1 million in securities over a 12-month period, with no limit on the number of accredited or unaccredited investors. Diff: 3 Topic: Transactions Exempt from Registration Skill: Factual Application

80) Bluegrass Inc. is incorporated and does all of its business in the state of Kentucky. Bluegrass has planned to issue $5,000,000 in new stock. Bluegrass has 10 potential investors, nine of whom live in Kentucky, and one who lives in Ohio. Only one of these potential investors is accredited. Can Bluegrass qualify for any of the registration exemptions under the Securities Act of 1933? Answer: Bluegrass can qualify for a private placement. It is offering too much to qualify under Rule 504 and cannot qualify for the intrastate offering because of the investor in Ohio. Diff: 3 Topic: Transactions Exempt from Registration Skill: Factual Application 81) Smith and Company, CPAs, performed the audit work for a large corporation in connection with its registration statement. Smith and Company performed the work according to all appropriate professional standards, but the corporation had cleverly made the inventory look much greater than it actually was. Because the company did not have as much inventory as was indicated on the financial statements, the company was worth much less than it appeared to be. Smith and Company has been named in a lawsuit under Section 11 of the Securities Act of 1933. Even though Smith and Company properly performed the audit, and the fraud on the part of the corporation was such that it would not be uncovered by an audit, Smith and Company cannot prove any of this in court because all of its audit working papers and computer documentation was accidentally shredded. Discuss Smith and Company's legal situation. Answer: Under Section 11, a plaintiff needs to prove only that there was a material misstatement and that someone was injured as a result. The due diligence defense essentially places the burden of proof on Smith and Company, and even though Smith and Company did nothing wrong, it looks doubtful that they will prove their due diligence defense. Diff: 2 Topic: Liability Provisions of the Securities Act of 1933 Skill: Factual Application

82) Jones is an appraiser who was hired by Monolith Corporation to appraise a number of its properties in connection with financial statements to be issued in connection with a registration statement. Because Monolith Corporation has a high turnover of investment real estate, Jones was hired again for help in preparing the annual financial statements for each of the next 2 years. It turns out that Jones was negligent in performance of all the appraisals that led to material misstatements on the financial statements of all years concerned. Jones did not know that the appraisals or financial statements were misstated. Discuss Jones' legal situation. Answer: Jones would be liable under Section 11 of the Securities Act of 1933. As an expert, he is subject to the act. Jones' negligence is sufficient for liability; intent, or scienter, need not be proven. Due diligence would be a defense, but Jones probably cannot prove it. Because of the lack of scienter, Jones would not be liable under Rule 10b-5 of the Securities Exchange Act of 1934. Diff: 3 Topic: The Securities Exchange Act of 1934 - Trading in Securities Skill: Factual Application

83) Mary is an assembly-line worker at a computer company. Mary becomes aware that an improvement is being made in the company's primary computer, which will significantly increase profits. Mary tells a friend to buy stock in the company. The friend does so and tells two other persons to do the same. The Company's profits increase greatly, and all three who purchased stock sell at a great profit. Discuss the liability of the parties. Answer: Mary, as an insider tipper, is liable for the profits of all three purchasers, as is Mary's friend. The two remote tippees are liable for their own profits if they had inside information and knew or should have known that the information was not public. Diff: 2 Topic: Insider Trading Skill: Factual Application 84) Fred is an officer at Hill Corporation. Fred, with no inside information, sells 100 shares of Hill stock in May at $50, and in July he buys 250 shares at $40. Is Fred liable for short-swing profits? Answer: Fred is liable. Any purchase and sale can be matched, and here a $40 purchase and $50 sale occurred within 6 months of each other (of 100 shares), even though Fred could not have actually sold any of the $40 shares. Diff: 2 Topic: Short-Swing Profits Skill: Factual Application

Corporation

72) In recent years shareholders have increasingly attempted to use shareholders' meetings as a forum to encourage corporations to operate in accordance with the views of one or some shareholders with respect to various policy issues. Common examples include environmental issues and human rights issues, especially for corporations with operations in other nations. Is this a proper forum for this particular type of activity? What are the arguments on each side of the issue? What other methods could these shareholders use to promote the viewpoints on these issues? Answer: In some cases these activities are successful in bringing about changes, as happened with some corporations in connection with overseas plants operating in "sweatshop" conditions. This is proper activity if one believes that corporations have obligations beyond simply earning the maximum profits for shareholders. Diff: 2 Skill: Ethics and Policy 73) Should shareholders encourage responsibility of corporations in which they invest, or should investors make those judgments by the choices of companies in which to invest? Which approach is more effective? Answer: There is no clear answer to whether corporate policies are more influenced by actions and views of current shareholders or by large numbers refusing to invest in the corporation. Diff: 1 Skill: Ethics and Policy 74) If a corporation's shareholders are supposed to have ultimate control over the corporation, is it appropriate for management to get involved in proxy contests among shareholders? Under what circumstances is it most appropriate for management to get involved? Answer: In many cases, members of management are also shareholders, thus it would be difficult to preclude their involvement. Management is most appropriately involved when the issue is value to the shareholders, rather than management protection of its jobs. Diff: 2 Skill: Ethics and Policy 75) Many persons believe that it is too easy for corporations to take over other corporations, and point to the large reductions in workforces which frequently result following mergers. Should there be limits placed on the ability to lay off employees following a business combination? What are the advantages and disadvantages of limited regulation of merger activity? Answer: Many argue that mergers act as incentives for the management of a company to not become bloated, and that regulation will interfere with free market efficiency. Diff: 1 Skill: Ethics and Policy

76) Maple Corporation wants to acquire Foodcity Corporation, a chain of supermarkets. Both corporations are publicly traded. Maple Corporation has some cash, but not a large amount, and it needs to have ample cash for its operations. How might Maple be able to acquire Foodcity? Answer: Maple could offer additional shares to the existing shareholders of Foodcity for their shares in a stock swap, merger, tender offer, or consolidation. Alternatively, Maple could borrow the money, possibly by issuing junk bonds in a leveraged buyout. Diff: 2 Topic: Mergers and Acquisitions Skill: Factual Application 77) Expansive Corporation made a tender offer of $65 per share to the shareholders of Hometown Corporation to acquire 75 percent, but no more than that, of the shares of Hometown. Because only 68 percent of the shares had been tendered in 30 days, Expansive offered $75 per share, and another 20 percent of the shares were tendered in 4 days. Expansive terminated the higher offer on the fifth day, paid $65 for all the shares tendered at that price, and paid $75 for some of the shares tendered at the higher price. Discuss Expansive's actions. Answer: Under the Williams Act, Expansive must keep the increased offer open at least 10 business days, pay the $75 price for all shares acquired, and acquire shares tendered on a pro rata basis from all who tendered. Diff: 2 Topic: Mergers and Acquisitions Skill: Factual Application 78) Ramone is president of Rock Permanence, Inc. Flash in the Pan Corporation has just made a tender offer to the shareholders of Rock Permanence. Flash in the Pan is known for severe job cuts after takeovers, so Ramone and the other officers do the following: 1. They adopt contracts with provisions that the contracts will expire Flash in the Pan should acquire Rock Permanence. 2. They tell many shareholders that they will be hired if they do not accept the offer. Each of these shareholders is told to keep the arrangement secret and that they are one of only a select few who will be hired. 3. They distribute an article from a newspaper 2 years earlier that discussed the inept management of Flash in the Pan. They do not tell the shareholders that the publisher of the article had been successfully sued by Flash in the Pan because of false statements. 4. They send mailings to their shareholders calling the management of Flash in the Pan a "committee of the devil" and "shareholders' nightmare." Discuss the appropriateness of the four listed actions by management. Answer: There are many ways to fight a tender offer. No. 1 is probably acceptable so long as management reasonably believes these actions to be in the best interest of the corporation and its shareholders. No. 2 is not acceptable because it is fraudulent and because it is probably not in the best interest of the corporation to hire so many people. No. 3 is at least misleading if not fraudulent. No. 4 is probably acceptable assuming that the terms used are considered to be opinions. Diff: 3 Topic: Fighting a Tender Offer Skill: Factual Application

Business Ethics

66) Beginning in about 1990, many credit card issuers began marketing more aggressively to college students on the basis that they have considerable future earning potential even though their current income is not very high. Prior to 1990, most credit card issuers required cosigners, who would typically be the students' parents. This has led to far more students incurring excessive debt. This has required some students to work longer hours while in college and to have more debt-related problems after getting out of college. Furthermore, employers are increasingly using credit information in the hiring selection process so that some students' debt problems adversely affect their ability to find a job. Evaluate the propriety of these marketing efforts. Answer: One question is who causes these problems. If the cause is the cardholder's unwise decisions, then the issuer has done no wrong. But if the issuer is part of the cause, then the issuer might have violated the moral minimum theory because it has caused harm. Any such harm would be difficult to quantify. Utilitarianism would ask if the overall good increased from these credit cards. Diff: 2 Topic: Business Ethics and Social Responsibility of Business Skill: Ethics and Policy

67) A company is planning to promote its services heavily via telemarketing. The company has learned that the majority of those to be called are strongly opposed to receiving telemarketing calls. In addition, many of the persons who will be called are elderly who might decide to purchase the product even though they do not really need it or cannot afford it. Discuss the appropriateness of proceeding with this plan under the different theories of the social responsibility of business. Answer: The telemarketing plan is presumably aimed toward maximizing profits. Whether the plan meets the moral minimum would depend on whether the company is the cause of any harm due to unwanted telemarketing calls or elderly customers purchasing unneeded products. Under stakeholder interests, the company would need to consider the needs of its customers, many of whom might be better served by other marketing methods. Under corporate citizenship, being a good corporate citizen might include avoiding such marketing methods. Diff: 2 Topic: Business Ethics and Social Responsibility of Business Skill: Ethics and Policy

68) Assume that a drug company has recently developed a new weight-loss drug that is available only by doctor's prescription. This drug has some significant side effects, but is quite effective for helping individuals lose weight. The drug is being heavily advertised directly to the public, resulting in large numbers of individuals contacting their doctors in order to get a prescription for the drug. Because of the side effects, this drug is intended only for persons who are severely overweight. Some of the advertising for this drug emphasizes the happiness and beauty that can result when one is slender, leading many doctors to over prescribe the drug. Discuss the drug company's actions in light of the theories of the social responsibility of business. Answer: The company's actions are presumably aimed at maximizing profits. It is likely that the moral minimum is being violated as there is likely injury that is not being compensated. The patients' needs are possibly not being addressed under the stakeholder interest theory, and the promotion of the "skinniness is godliness" belief might violate corporate citizenship. Diff: 2 Topic: Social Responsibility of Business Skill: Ethics and Policy 69) The government has proposed demolishing 800 of 2,000 units in a low-income public housing project that has become crime-ridden and in poor repair. These 800 units will be replaced with 300 units, half of which will be for low-income families, and half for moderate- income families, resulting in fewer low-income housing units in total. Evaluate this proposal under utilitarianism. Answer: There might be more overall good if crime and other problems are reduced, but crime, as well as residents, might simply be displaced to other parts of the community. Other factors in evaluating what amounts to the overall good include the demand for low-income housing, other options for those displaced, and the current project vacancy rate, which would affect the actual numbers displaced. Diff: 2 Topic: Business Ethics Skill: Ethics and Policy

70) Compare and contrast the views held by Milton Friedman regarding the ethical responsibility of a corporate business to that of someone following the stakeholder interest theory of social responsibility. Answer: Milton Friedman asserted that in a free society, "There is one and only one social responsibility of business to use its resources and engage in activities designed to increase its profits as long as it stays within the rules of the game." To Friedman, following the "rules of the game" meant engaging in open and free competition without deception and fraud. Someone who follows the stakeholder interest theory of social responsibility would say that, although a corporation does have an obligation to its shareholders, there are also others to whom the corporation or business owes an obligation. These others include employees, customers, suppliers, creditors, and the local community. Diff: 2 Topic: Social Responsibility of Business Skill: Ethics and Policy

Employment

61) Should there be a lower minimum wage for some workers, for example, workers under age 18? What are the arguments for and against a two-tier minimum wage? Answer: A lower minimum wage might be justified because of these workers' lack of experience. It also might allow workers to be employed who might otherwise be unable to find work. On the other hand, employers might choose to hire the younger workers at the expense of older workers who have families to support. Diff: 2 Skill: Ethics and Policy 62) The Employee Retirement Income Security Act does not require any employers to provide pension plans for their employees. Should this law be changed so that employers are required to provide at least some minimum pension plan to employees? Answer: The goal of ERISA is to ensure that any benefits promised to employees will, in fact, be paid when the employee is retired, and that employees are not otherwise misled about the benefits that they will receive. The marketplace should probably determine whether or not particular employers offer a pension plan. Diff: 2 Skill: Ethics and Policy

63) Should the law set the 40-hour workweek, given that many persons might choose to work longer hours but cannot because their employers do not want to pay overtime wages? In other words, many persons might be willing to work 45 or 50 hours a week at their regular wage rate, but cannot under the current law. This law also prevents a covered employee from working 50 hours one week and only 30 hours the other week of a 2-week pay period. Should employees be able to voluntarily work beyond the limits for regular pay if they so choose? Answer: The problem with allowing this is that employers could force employees to "choose" to work in excess of the limits without receiving the overtime pay. Diff: 2 Skill: Ethics and Policy 64) Debbie was the president and chief executive officer of RST corporation. Debbie was also a skydiving enthusiast. She often stated that skydiving showed the worth of a person more than any other activity. On weekends, Debbie and a group of RST executives would go skydiving. Mark had been hired as a junior executive several years ago, and had performed his job well. RST needed a new vice-president of marketing to fill a vacancy caused by retirement, and Mark thought he had a good chance to get that job. Debbie asked Mark to go skydiving with her group on Saturday. Mark did not want to go, but he thought that if he did not go, it would cost him this promotion. Most, but not all, of the other vice-presidents participated in these jumps. Mark jumped and was killed when his parachute failed to open. Beth, Mark's wife, sued to collect workers' compensation for the death of Mark. What was the result? Answer: The crucial test is whether the injury was work-related. The fact that this was a regular activity conducted with a group solely from RST Corporation would support a finding that it was work-related. On the other hand, this could be viewed as a voluntary activity conducted outside of work because no one was required to attend. One might want to know if any business was discussed or conducted on these days.

Diff: 2 Topic: Workers' Compensation Acts Skill: Factual Application 65) Mary owns a medium-size distribution business with about 20 employees. Mary had an unusual management style and from time to time would throw items at her employees. Paul was working in the warehouse one hot summer day and accidentally gave a will-call customer the wrong goods. The customer came back to the office a short while later upon discovering the problem. Mary was in the office and asked who had filled his order. The customer described Paul, whereupon Mary went to the warehouse and threw a computer printout, with stock numbers and product descriptions, at Paul, yelling, "Use this, you idiot. Maybe you can do your job then!" Paul was startled, and by reflex turned to run after Mary, but slipped when he was barely under way. Paul's back was injured when the computer printout hit him, and he injured his leg when he slipped. What recourse does Paul have? Answer: Workers' compensation will cover Paul's injuries if they are work-related. Both injuries are probably work-related, and Paul could recover from workers' compensation. Because at least the first was intentionally caused by the employer, Paul could also sue Mary. Diff: 2 Topic: Workers' Compensation Acts Skill: Factual Application

66) The Bonzo Bike Accessory Company operates in a small commercial building in Davis, California. The company employs several people who make a variety of bicycle accessories. Mike Bonzo, the owner, has read carefully and knows that he is complying with all of the specific applicable safety regulations. One day, an OSHA inspector arrives, inspects the workplace, and cites several dangerous conditions. There was not a single specific regulation violated for any of the dangerous conditions cited. Mike admits that four of the cited conditions were, in fact, dangerous, but still insists that he did not violate OSHA regulations. Discuss Michael's situation. Answer: Mike has a general duty to provide a workplace free of hazards in addition to meeting any specific safety regulations. Diff: 2 Topic: Occupational Safety and Health Act Skill: Factual Application

67) Bob works in a large law firm with the title of paralegal. Bob had worked as a legal secretary for years, but was promoted to paralegal last year. The secretaries in the firm were paid on an hourly basis, and all time in excess of 40 hours per week was paid at one and a half times the hourly rate. Bob learned much in his years working in the residential real estate department of his law firm. In fact, he could draft most uncomplicated sale and purchase contracts and was doing this while still working as a secretary. He would frequently draft the contracts using forms, making changes and insertions where necessary, and merely have the attorneys review them for any needed revisions. Bob was excited to hear about the promotion, but then was disappointed to learn that he would not be getting a raise, and that the duties of his job would not change much. Bob's hourly wage was converted to a weekly salary based on 40 hours at his prior wage. No overtime would be paid, which upset Bob because he had averaged about 20-25 hours of overtime per month, and always welcomed the opportunity to earn extra money. The law firm assured Bob that he would now be considered for a year-end bonus based on performance and contribution to the firm. The law firm became busier during the year, and Bob increasingly had to work overtime. He continued to do some drafting of contracts as well as most of the word processing for the real estate department. At the end of the year, the firm announced that profits were less than hoped for and that the maximum bonus would be $100, which Bob received. Does Bob have a claim to receive any additional compensation for his work during the year? Answer: Bob might have a promissory estoppel claim based on the promise that he would receive a bonus to make up for the loss of overtime pay. Bob might also have a claim under the Fair Labor Standards Act. It would depend on whether Bob truly was an exempt employee or whether the promotion and change to a salary basis of pay was merely an attempt to avoid paying overtime. Diff: 3 Topic: Fair Labor Standards Act Skill: Factual Application

68) Sam operates a small business with 12 employees. Sam says to his employees, "I'm not required to give you a pension plan, but I will do so. The plan is that if you stay employed with me until you reach age 65, I will give you a pension of $1,000 per year during retirement for each full year you have worked. Because I believe so strongly in this company, if I invest any money in the fund in advance, I will put half of it into stock of this company. If you leave before retirement, you don't get it. That way, you'll have more incentive to work hard and stay with the company." Comment on the legal aspects of this plan. Answer: Sam is correct that he need not provide a pension fund. But, if offering one, he must follow the provisions of the ERISA. This plan violates the vesting requirements, the funding requirements, and the restrictions on investing in the sponsoring company's stock. The plan is required to be in writing. Diff: 3 Topic: Employee Retirement Income Security Act Skill: Factual Application

69) Many employers are making greater use of contract labor. For example, some firms now will provide a 500-person temporary contract sales force, which might be useful where a firm has a new product that will require labor-intensive selling initially, but once introduced, will require far fewer salespeople. What are the pros and cons of this trend? Answer: As the case involving Microsoft in the text points out, often this practice is abusive and used primarily to get around the employment laws and the protections that they provide to employees. Some businesses argue that this trend has accelerated because the employment laws are slanted too much in favor of employees, thus leading to employers taking drastic steps to not have workers classified as employees. Diff: 2 Skill: Ethics and Policy

78) Under what circumstances, if any, do you believe affirmative action is appropriate? Was affirmative action appropriate when such programs were first used? If there has been a change in the appropriateness of affirmative action, why has there been a change? Does it make a difference if the program is administered by the government or is voluntarily implemented by a private employer? Answer: Under recent court decisions, affirmative action programs must be narrowly tailored to be legal. Opinions differ greatly about the appropriateness of affirmative action programs. Diff: 2 Skill: Ethics and Policy 79) The Americans with Disabilities Act has resulted in a large number of claims filed by persons claiming to be covered under the act for conditions such as a weak back. Who was intended to be protected by the Act? Is the Act being abused? If so, how can this abuse be reduced? Answer: Some studies have shown that the Act has not really helped those with the greatest disabilities, and those who were intended to be protected. On the other hand, many individuals have received workplace accommodations that both increase productivity for the employer and greatly improve the working life of the employee. Diff: 2 Skill: Ethics and Policy 80) Should the overseas operations of United States corporations be subject to the United States laws prohibiting discrimination in employment? If so, to what extent? What practical difficulties are there to applying the laws to overseas operations? Answer: Some argue that this would be a form of imperialism. On the other hand, if a United States company merely was providing additional protections that were legal, though not required, it might be hard to call it imperialism. Diff: 2 Skill: Ethics and Policy

81) Some have criticized the widespread filing of sexual harassment claims on the grounds that false claims are too easy to file and allege. Do you agree? How could the number of false accusations be reduced without hindering the ability of victims to file legitimate claims? Answer: The recent court decisions recognizing a defense where the employer exercised reasonable care to prevent sexual harassment and the employee failed to make use of corrective or preventive measures should reduce this problem.

Diff: 2 Skill: Ethics and Policy 82) Suppose that an employer has an informal policy to terminate many, but not all, of its production workers as they approach the age of 40. The goal is to have only the best employees working once they reach age 40 because of the increased difficulty in terminating them after reaching age 40 due to the Age Discrimination in Employment Act. Is this action legal? Is it ethical? Answer: This action is probably legal, although most would question whether it is ethical. Diff: 1 Skill: Ethics and Policy 83) Newton's fire department had a minimum height and weight requirement for its firefighters. These requirements disqualified approximately 80 percent of all women, but only 5 percent of all men. Jane, a female who has wanted to be a firefighter all of her life, applied for a position on the Newton fire department but was not hired because she did not meet the minimum height and weight requirements. Jane sues the department for discrimination. Explain whether or not Jane has a valid claim under the antidiscrimination laws. Answer: This is likely a disparate impact claim under a facially neutral rule. The rule is legitimate if it relates to a bona fide occupational qualification, which it probably does not. A BFOQ must be job-related and a business necessity. Diff: 2 Topic: Title VII of the Civil Rights Act of 1964 Skill: Factual Application 84) Jane was employed at the headquarters of Technobyte Corporation. Jane's immediate supervisor, Paul, liked Jane very much, so he continually asked Jane out on dates. Jane always declined courteously. Finally, Jane agreed to have dinner with Paul, hoping to appease him and get a chance to put an end to all of this. During dinner, Jane explained to Paul that she already had a boyfriend and that she did not date married men. (Paul was married.) After that night, Paul did not ask Jane out on a date again, but Paul became less friendly toward Jane at work. Several months later a position opened up for a promotion. Although Jane was one of the best qualified of the 12 persons eligible for the promotion, another employee was promoted. Does Jane have a claim against Paul? Answer: Jane likely has a sexual harassment claim against Paul. The validity of her claim depends on, among other items, the actual reason she was not given the promotion. Diff: 3 Topic: Title VII of the Civil Rights Act of 1964 Skill: Factual Application

85) Martha is the coach of the female basketball team, and Aaron is the coach of the male basketball team at State University. Both Martha and Aaron have comparable knowledge of basketball, both have comparable skills, both work comparable hours, and both have comparable win-loss records. The male team is a revenue, generating sport, producing about $5 million dollars annually. The female team does not produce revenues. Martha is paid $30,000 per year for her job, but Aaron is paid $100,000 per year for his. Martha sued State University for a violation of the Equal Pay Act. Discuss the arguments on both sides of this case. Answer: Martha initially appears to have a fairly strong claim because the jobs are so similar. The University could defend the difference in pay on the grounds that the male coach's job is more difficult if there is greater competition in men's basketball or because of the additional responsibilities that come with keeping large numbers of paying fans satisfied. Additionally, the University could argue the generation of revenue is an aspect of performance quality that it can reward with higher pay. Diff: 3 Topic: Equal Pay Act of 1963 Skill: Factual Application 86) A car dealership ran an advertisement seeking a driver for its courtesy car used to pick up and drop off customers who bring in their car for service. The advertisement says that they want someone "with a minimum of 40 years experience." Are there any problems with this advertisement under the antidiscrimination laws? Answer: The advertisement probably violates the Age Discrimination in Employment Act because there could be qualified applicants in their 40s who could not have 40 years of work experience as a professional driver. It is unlikely that the requirement is a bona fide occupational qualification because many people would be sufficiently qualified for the job with far fewer years of driving experience. Diff: 3 Topic: Age Discrimination in Employment Act of 1967 Skill: Factual Application 87) Cindy is 36 years old and works as a sales representative for a small manufacturer. Cindy and her husband have been married for about 12 years. They have no children because initially they wanted to establish their careers before taking on the obligations of raising a family. Cindy has been trying to get pregnant for a couple of years without success. Cindy and her husband have recently learned that the source of the problem is Cindy, and that she needs to reduce her working hours in order to reduce her stress level. Cindy currently works about 60 hours a week and wants to reduce her hours to about 40 or so. Cindy's employer refuses to change her responsibilities, but says that it is no problem if she works fewer hours per week, so long as she gets all her work finished. Cindy brings a claim under the Americans with Disabilities Act on the grounds that her inability to get pregnant is a covered disability. Discuss the strengths and weaknesses of Cindy's case. Answer: One issue is whether the inability to get pregnant is an impairment that "substantially limits" a "major life activity." Some decisions have said it is not. If she is covered, there may be an issue as to what is a reasonable accommodation. Diff: 3 Topic: Americans with Disabilities Act of 1990 Skill: Factual Application