BUSINESS LAW 320 HOMEWORK 11 Employee versus Independent Contractor

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1. Employee versus Independent Contractor.
Clifford Aymes was hired by Jonathan Bonelli of Sun Island Sales to create a computer
program for Sun Island to use in maintaining records of its cash receipts, inventory, sales,
figures, and other data. No agreement was reached as to ownership rights in the program that
Aymes developed, called CSALIB. Aymes did most of his programming at the Sun Island
office. Although Bonelli gave Aymes frequent instructions as to what he wanted from the
program, Aymes generally worked alone and enjoyed considerable autonomy in his work. He
worked fairly regular hours, but he was not always paid by the hour—occasionally, he
submitted bills (invoices) to Sun Island for his work. Aymes never received any employee
benefits, such as health insurance, and Sun Island never withheld federal and state taxes from
Aymes’s paycheck; nor did it pay any Social Security taxes on Aymes’s earnings. When
Bonelli unilaterally cut Aymes’s hours in violation of an alleged oral agreement, Aymes left
Sun Island and demanded compensation for Sun Island’s use of CSALIB. Bonelli refused to
pay Aymes for the program’s use and also stated that he would not pay Aymes $14,560 in back
wages unless Aymes signed a form releasing all rights in CSALIB. Aymes then sued Bonelli
and Sun Island for copyright infringement, and the court had to decide who owned the
copyright in the program. Central to the determination of this issue was whether Aymes was
an employee of Sun Island or an independent contractor. What should the court decide, and
why? [Aymes v. Bonelli, 980 F.2d 857 (2d Cir. 1992)] (See Agency Relationships.)
2. Agent’s Duties to Principal.
Ana Barreto and Flavia Gugliuzzi asked Ruth Bennett, a real estate salesperson who worked
for Smith Bell Real Estate, to list for sale their house in the Pleasant Valley area of Underhill,
Vermont. Diana Carter, a California resident, visited the house as a potential buyer. Bennett
worked under the supervision of David Crane, an officer of Smith Bell. Crane knew, but did
not disclose to Bennett or Carter, that the house was subject to frequent and severe winds, that
a window had blown in years earlier, and that other houses in the area had suffered wind
damage. Crane knew of this because he lived in the Pleasant Valley area, had sold a number of
nearby properties, and had been Underhill’s zoning officer. Many valley residents, including
Crane, had wind gauges on their homes to measure and compare wind speeds with their
neighbors. Carter bought the house, and several months later, high winds blew in a number of
windows and otherwise damaged the property. Carter filed a suit in a Vermont state court
against Smith Bell and others, alleging fraud. She argued in part that Crane’s knowledge of the
winds was imputable to Smith Bell. Smith Bell responded that Crane’s knowledge was
obtained outside the scope of employment. What is the rule regarding how much of an agent’s
knowledge a principal is assumed to know? How should the court rule in this case? Why?
[Carter v. Gugliuzzi, 716 A.2d 17 (Vt. 1998)] (See Duties of Agents and Principals.)
3. Undisclosed Principal.
John Dunning was the sole officer of the R. B. Dunning Co. and was responsible for the
management and operation of the business. When the company rented a warehouse from
Samuel and Ruth Saliba, Dunning did not say that he was acting for the firm. The parties did
not have a written lease. Business faltered, and the firm stopped paying rent. Eventually, it
went bankrupt and vacated the property. The Salibas filed a suit in a Maine state court against
Dunning personally, seeking to recover the unpaid rent. Dunning claimed the debt belonged to
the company because he had been acting only as its agent. Who is liable for the rent, and why?
[Estate of Saliba v. Dunning, 682 A.2d 224 (Me. 1996)] (See Liability in Agency
4. Liability for Employee’s Negligence.
Lend Lease Trucks, Inc., employed Thomas Jones as an interstate truck driver. While on an
assignment, Jones parked on the shoulder of U.S. Highway 301 near Kenly, North Carolina,
and crossed the highway to the Dry Dock Lounge. In the lounge, Jones drank enough liquor for
his blood-alcohol level to rise to dramatically above the level at which he could legally drive
his truck. After a few hours, Jones left the lounge. As he started across the highway to his
truck, he darted into the path of a motorcycle driven by Edward McNair. In the collision, Jones
and McNair were killed. McNair’s wife, Catherine, filed a suit in a North Carolina state court
against Lend Lease Trucks, Inc., and others, claiming in part that Jones was acting within the
scope of employment at the time of the accident. The case was removed to a federal district
court. Lend Lease filed a motion to dismiss, the court granted the motion, and Catherine
appealed. Was Jones acting within the scope of employment at the time of the accident?
Explain. [McNair v. Lend Lease Trucks, Inc., 62 F.3d 651 (4th Cir. 1995)] (See Liability in
Agency Relationships.)
5. Liability for Independent Contractor’s Torts.
Greif Brothers Corp., a steel drum manufacturer, owned and operated a manufacturing plant in
Youngstown, Ohio. In 1987, Lowell Wilson, the plant superintendent, hired Youngstown
Security Patrol, Inc. (YSP), a security company, to guard Greif property and “deter thieves and
vandals.” Some YSP security guards, as Wilson knew, carried firearms. Eric Bator, a YSP
security guard, was not certified as an armed guard but nevertheless took his gun, in a
briefcase, to work. While working at the Greif plant on August 12, 1991, Bator fired his gun at
Derrell Pusey, in the belief that Pusey was an intruder. The bullet struck and killed Pusey.
Pusey’s mother filed a suit in an Ohio state court against Greif and others, alleging, in part, that
her son’s death was the result of YSP’s negligence, for which Greif was responsible. Greif filed
a motion for a directed verdict. What is the plaintiff’s best argument that Greif is responsible
for YSP’s actions? What is Greif’s best defense? Explain. [Pusey v. Bator, 94 Ohio St.3d 275,
762 N.E.2d 968 (2002)] (See Liability in Agency Relationships.)

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