Impact of Law on Business

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Table of Contents

Introduction
Employment Contract Law
Consumer Protection Laws
Tax Laws
Tort Law
Contract Laws
Torts and Contracts
References

Introduction

It is important for all business owners to know and understand the laws that affect their businesses. It is equally important to comply with those laws. Ignorance of the laws has never been a valid excuse in any Court of Law, and it never will be. As a business owner, it is your responsibility to know what laws affect your business.

Since every business, in every state, in every country is different, the laws that affect your business may be different than the laws that affect other businesses.

Employment Contract Law

A contract of employment is a contract of service and comes into being when an employee agrees to work for an employer in return for pay. The employment contract sets forth the terms and obligations of the employer’s relationship with the employee. Most employment contracts are negotiable. After signing the employment contract, the employee and employer are both bound under the terms of the contract. The employment contract often gives the employer some control over when they can terminate an employee. Similarly, an employment contract can provide the employee with a sense of job security if it is for a set term. Here are come provisions & clauses in employment contract:

Smoking in the Workplace

This law adds “common areas” to existing regulations that prohibit smoking in the workplace. These” common areas” include lobbies, lounges, waiting areas, elevators, stairwells, restrooms, and covered parking lots (New Laws Will Affect Business Owners in 2007, 2006).

Reporting of Overtime Hours

Under existing law, California employers are required to provide employees with an itemized wage statement twice per month or at the time of payment of wages, and the wage statement must show the total hours worked (except in limited circumstances). Existing law also requires employers to record overtime hours worked in a payroll period on the pay stub for that period, but permits employers to pay those overtime hours in the next payroll period (New Laws will Affect Business Owners in 2007, 2006).

Payment of Workers’ Compensation Death Benefits

This law required workers’ compensation death benefits to be paid to the Department of Industrial Relations (DIR) when a deceased employee was not survived by a person entitled to a dependency death benefit. This law provides that a surviving employee’s dependent, heir, or other person entitled to a deceased employee’s accrued and unpaid compensation, is eligible to receive the workers’ compensation death benefits associated with the employee’s death. This new law clarifies that when a deceased employee leaves no total or partial dependents, the death benefits will be paid to the estate of the deceased employee rather than to the DIR (New Laws Will Affect Business Owners in 2007, 2006).

Probationary Period

The contract can include a probationary period and can allow for this period to be extended. The Unfair Dismissals Acts will not apply to the dismissal of an employee during a period at the beginning of employment when he/she is on probation or undergoing training provided that:

the contract of employment is in writing;
the duration of probation or training is one year or less and is specified in the contract.

The above exclusion from the Acts will not apply if the dismissal results from trade union membership or activity, pregnancy related matters, or entitlements under the maternity protection, parental leave, adoptive leave and career’s leave legislation.

Consumer Protection Laws

Consumer law, then, is the law of everyday contracts and transactions involving individual consumers. By consumers, we mean real people acting on their own behalf, as opposed to the same real people when they are working for a business or company. Consumer law usually deals with smaller amounts of money than business law, but sometimes hundreds of thousands are at stake. What does the law have to do with everyday economic dealings? There is always some underlying set of rules that governs the way people deal with each other, especially when value (usually money, goods and services) is changing hands.

Tax Laws

A corporation is recognized as a separate legal and taxable entity, and it pays its own taxes to many federal, states, and local taxing agencies. If the corporation is operating internationally, it has the additional problem of complying with the tax laws of foreign countries. Taxes may be levied on income, sales, and property. The federal corporate income tax is the most important because it often represents the largest tax liability.

Thus it can have a major effect on the financial decisions.

A regular corporation is subject to double taxation. It is taxed first as a separate entity at the corporate level on the corporation’s taxable income. Then, when the after tax profits are distributed as dividends to the shareholders, they are again taxed at the shareholder’s level (Shim & Henteleff, 2008).

Tort Law

A tort is a legal wrong done by one person to another, which is not based on a contractual relationship. A common example is an auto accident injuring someone caused by a driver’s negligence. It is not based on a contract between the driver and injured party, but on a legally imposed duty of care (i.e., that we won’t be negligent in dealing with others).

Case #1: A common example is an auto accident injuring someone caused by a driver’s negligence. It is not based on a contract between the driver and injured party, but on a legally imposed duty of care (i.e., that we won’t be negligent in dealing with others). You could conceivably be damaged beyond the scope of your contractual relationship with a seller if, for example, you tripped on a pothole in the store parking lot. In this example, though, the consumer-seller relationship is incidental to the accident. It is a general principle of contract law that the contract — the terms of the transaction between to parties — defines the whole relationship between them, and any dispute actually related to that contract (as opposed to out in the parking lot) will be decided under contract law only (How Consumer Law Fits into the Big Picture, n.d.).

Case #2: On the other hand, a consumer could have a tort claim if a merchant’s actions are so outrageous that they go beyond any behavior that could possibly have been anticipated in the contractual relationship. Suppose the day before he was due to paint your house, and after he’d scraped off all the old paint, the housepainter cancels your contract with him, saying he can make more money on another job. Since you’re having a graduation party at home next week, you want the house to be painted quickly, and end up paying a higher amount to get someone to come fast. As outrageous as the painter’s actions sound, your damages would be limited to your additional cost for the second painter. If, however, the first painter not only cancelled but glued all the paint he had scraped off back onto the house — gluing all your windows shut in the process — you probably would have a tort action against the painter for damaging your house. Besides extreme examples such as these, in which there are personal injuries or physical damage to property, tort law is not usually a source of relief for aggrieved consumers (How Consumer Law Fits into the Big Picture, n.d.)

Contract Laws

Creation of a Contract

In the eyes of the law, a contract arises when there is an offer, acceptance of that offer, and sufficient “consideration” to make the contract valid:

Consideration is a legal term given to the bargained-for exchange between the parties to the contract — something of some value passing from one party to the other. Each party to the contract will gain some benefit from the agreement, and will incur some obligation in exchange for that benefit (Contracts and the Laws, 2008).

At Common Law a promise under seal was enforceable without the necessity of legal consideration—something of value—either because the seal was a substitute for consideration or because the existence of consideration was conclusively presumed. Although most states have abolished seals, some states have provided by statute that a seal raises a presumption of consideration. Consideration is what must be given up by each party when making an agreement; this may be by means of doing or not doing an act or just promising to do or not do an act. Consideration can be defined as being a benefit to one party or detriment to the other. Thus it is necessary to reflect this statement of consideration in a contract.

Consideration is simply something of value received by a promisor from a promisee. It can take the form of a right, interest or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility, given, suffered or undertaken by the other. If there is no consideration there is no contract; and if there is no contract, there is nothing upon or from which to found or create liability.

Torts and Contracts

Torts is the liberty to act, whether with respect to property or to contract is constrained by the rights of others not to have harm imposed upon them by such acts. While contracts is a liberty to act upon owned objects. The liberty to act includes use and disposition. The most important liberty of disposition is freedom of contract, whereby an owner transforms some of his liberties to use into obligations for himself and rights to others.

References

‘Contracts and the Law’, 2008, Find a Law. Web.

‘How Consumer Law Fits into the Big Picture’, n.d., The ABBA Consumer Guide, Chap. 1, 2008. Web.

’New Laws Will Affect Business Owners in 2007’, 2006, Ferruzo & Ferruzo, LLP. Newport Beach, California, 2008. Web.

Shim, J.K. and Henteleff, N. 2008, ‘What Every Engineer Should Know about Accounting and Finance’, Web.

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