MGMT 417 – Module 1 – Exam 1 Study Guide and Concept
Review
Freedom to Contract (Employment Relationship) - correct answer ✔✔ The relationship between
an employer and an employee is essentially based on a contract: the exchange of the
employee's labor in return for compensation.
The idea of freedom to contract means that an employee may choose to work, or not to work,
for any particular employer, and an employer may choose to hire, or not to hire, any particular
applicant. It also means that either party may terminate the relationship at any time... with
some exceptions, as we will see. As a result, most employment relationships are "at-will"
agreements.
Government Regulation - correct answer ✔✔ The question then is to what extent can Congress
or the courts regulate the employment relationship? In other words, to what extent can the
government direct employers in how to run its business, or whom it should hire, or how it
should treat its employees?
Congress and states enacted laws when they believed that there was an imbalance of power
between the employer and the employee. Examples include:
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
Opposing Government Regulation of the Employment Relationship - correct answer ✔✔ There
are those who oppose any government regulation of the employment relationship. Their
arguments are noted below.
, The free market will encourage employers to make rational, un-biased decisions.
Goal is to maximize profits, so employers will hire the best qualified employees, regardless of
race, gender, religion.
Employers should have freedom to make business decisions without government interference
Those who Favor Government Regulation - correct answer ✔✔ Alternatively, there are those
who favor government regulation of the employment relationship. Their arguments are also
noted below.
Acting in the best interest of society is more important than acting in the best interest of the
one's business.
Companies can discriminate and still be profitable.
People do not always act rationally.
Discrimination is unjust and continues on conscious and unconscious levels.
Introduction to Worker Classification - correct answer ✔✔ Government regulation of the
employment relationship (i.e., the anti-discrimination statutes) applies only to employees, not
independent contractors, so it is important to be able to identify whether a worker is classified
as an employee or an independent contractor.
Employment Relationship - correct answer ✔✔ Based on common law of agency
(master/servant)
Employer is the principal, employee is the agent
Agent acts on behalf of the principal and under the principal's control
Independent contractor - correct answer ✔✔ Person who contracts with a principal to perform
a specific task according to her own methods
The principal does not have right to exercise control over the physical details of the work
Review
Freedom to Contract (Employment Relationship) - correct answer ✔✔ The relationship between
an employer and an employee is essentially based on a contract: the exchange of the
employee's labor in return for compensation.
The idea of freedom to contract means that an employee may choose to work, or not to work,
for any particular employer, and an employer may choose to hire, or not to hire, any particular
applicant. It also means that either party may terminate the relationship at any time... with
some exceptions, as we will see. As a result, most employment relationships are "at-will"
agreements.
Government Regulation - correct answer ✔✔ The question then is to what extent can Congress
or the courts regulate the employment relationship? In other words, to what extent can the
government direct employers in how to run its business, or whom it should hire, or how it
should treat its employees?
Congress and states enacted laws when they believed that there was an imbalance of power
between the employer and the employee. Examples include:
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
Opposing Government Regulation of the Employment Relationship - correct answer ✔✔ There
are those who oppose any government regulation of the employment relationship. Their
arguments are noted below.
, The free market will encourage employers to make rational, un-biased decisions.
Goal is to maximize profits, so employers will hire the best qualified employees, regardless of
race, gender, religion.
Employers should have freedom to make business decisions without government interference
Those who Favor Government Regulation - correct answer ✔✔ Alternatively, there are those
who favor government regulation of the employment relationship. Their arguments are also
noted below.
Acting in the best interest of society is more important than acting in the best interest of the
one's business.
Companies can discriminate and still be profitable.
People do not always act rationally.
Discrimination is unjust and continues on conscious and unconscious levels.
Introduction to Worker Classification - correct answer ✔✔ Government regulation of the
employment relationship (i.e., the anti-discrimination statutes) applies only to employees, not
independent contractors, so it is important to be able to identify whether a worker is classified
as an employee or an independent contractor.
Employment Relationship - correct answer ✔✔ Based on common law of agency
(master/servant)
Employer is the principal, employee is the agent
Agent acts on behalf of the principal and under the principal's control
Independent contractor - correct answer ✔✔ Person who contracts with a principal to perform
a specific task according to her own methods
The principal does not have right to exercise control over the physical details of the work
