CHAPTER 01
The Regulation of Employment
True / False Questions
1. (p. 7) Regulations governing the employer-employee relationship are based on agency law
and failure of an employee/agent to act according to the employer's instructions could result in
liability for the employer.
TRUE
Difficulty: 1 Easy
2. (p. 8) Misclassification of employees as independent contractors can result in liability under
the Fair Labor Standards Act of 1938.
TRUE
Difficulty: 1 Easy
3. (p. 7) If an agent acts without authority of the principal, the principal is not liable for any
resulting loss to a third party.
FALSE
Difficulty: 1 Easy
4. (p. 7) There is one commonly accepted definition of "employee" used by courts.
FALSE
Difficulty: 1 Easy
,5. (p. 9) An employer is vicariously liable for the actions of an employee causing harm to a
third party outside the course of employment.
FALSE
Difficulty: 2 Medium
6. (p. 16) Under the economic realities test, courts consider whether the worker is economically
dependent on a particular enterprise or works for himself or herself.
TRUE
Difficulty: 1 Easy
7. (p. 16) A signed agreement between a company and a worker that specifically states that no
employee-employer relationship exists will be controlling in the event of a legal dispute over
whether the worker is covered by the National Labor Relations Act.
FALSE
Difficulty: 1 Easy
8. (p. 8) Marco provides accounting services to the Consolidated Bank as an independent
contractor. Marco must pay his own Social Security (FICA), FICA excise, and federal
unemployment compensation (FUTA), taxes. However, Consolidated is responsible for
federal and state income tax withholdings.
FALSE
Difficulty: 1 Easy
9. (p. 11) Willful violations of FLSA subject an employer to criminal liability.
TRUE
Difficulty: 1 Easy
,10. (p. 8, 13) If an employer does not make any withholding from a worker's pay for taxes, then
the IRS deems the worker to be an independent contractor.
FALSE
Difficulty: 2 Medium
11. (p. 20) The Wonder City Restaurant uses a staffing firm to obtain temporary workers. After
the staffing firm sent over a temporary hostess, Wonder asked the firm to replace her with
someone of another race. If the hostess who was replaced proceeds with a Title VII claim,
Wonder cannot be liable because the temporary hostess was never its employee.
FALSE
Difficulty: 1 Easy
12. (p. 28) Non-compete agreements are governed by federal law.
FALSE
Difficulty: 2 Medium
13. (p. 26) The Civil Rights Act of 1866 applies to employers with 15 or more employees.
FALSE
Difficulty: 2 Medium
14. (p. 27) The Rehabilitation Act applies to federal contractors with contracts with the federal
government in excess of $10,000 annually.
TRUE
Difficulty: 2 Medium
, Multiple Choice Questions
15. (p. 7) ABC, Inc. solicited bids from various independent contractors to landscape the
grounds of its new office complex. Drew, head of facilities management told Patty, his
secretary, that he would not accept any bids from Hispanic contractors. Drew explained that
he would authorize hiring only American contractors to work on the grounds. A Hispanic
contractor brings a lawsuit against ABC for discrimination.
A. Drew's refusal to hire Hispanic companies is a violation of the Independent Contractors
Act of 2006.
B. Drew's refusal to hire Hispanic companies is a violation of Title VII of the Civil Rights
Act.
C. The Hispanic contractor cannot prevail in a discrimination case because Drew's
conversation with his secretary is confidential and cannot be used as evidence.
D. Drew's refusal to hire Hispanic companies is not a violation of Title VII of the Civil Rights
Act because that law does not cover discrimination against independent contractors.
Difficulty: 3 Hard
16. (p. 11) Ling frequently stocks shelves for Ace's Market on an as needed basis. Ace pays Ling
$5 per shelf. One day Ling falls off a broken ladder while stocking a shelf. Ling is seriously
injured:
A. If Ling is determined to be an independent contractor, he is eligible for workers'
compensation.
B. If Ling is determined to be an employee, he is eligible for workers' compensation.
C. Ling is eligible for workers' compensation whether he is an employee or an independent
contractor.
D. None of the above.
Difficulty: 2 Medium
17. (p. 12) The three main tests courts use to classify employees and independent contracts are:
A. Master-servant rule, Darden test, and economic realities test.
B. Master-servant rule, IRS 20-factor analysis, and hybrid analysis.
C. Common-law agency test, IRS 20-factor analysis, and economic realities test.
D. Common-law agency test, FedEx test, and hybrid analysis.
Difficulty: 1 Easy
The Regulation of Employment
True / False Questions
1. (p. 7) Regulations governing the employer-employee relationship are based on agency law
and failure of an employee/agent to act according to the employer's instructions could result in
liability for the employer.
TRUE
Difficulty: 1 Easy
2. (p. 8) Misclassification of employees as independent contractors can result in liability under
the Fair Labor Standards Act of 1938.
TRUE
Difficulty: 1 Easy
3. (p. 7) If an agent acts without authority of the principal, the principal is not liable for any
resulting loss to a third party.
FALSE
Difficulty: 1 Easy
4. (p. 7) There is one commonly accepted definition of "employee" used by courts.
FALSE
Difficulty: 1 Easy
,5. (p. 9) An employer is vicariously liable for the actions of an employee causing harm to a
third party outside the course of employment.
FALSE
Difficulty: 2 Medium
6. (p. 16) Under the economic realities test, courts consider whether the worker is economically
dependent on a particular enterprise or works for himself or herself.
TRUE
Difficulty: 1 Easy
7. (p. 16) A signed agreement between a company and a worker that specifically states that no
employee-employer relationship exists will be controlling in the event of a legal dispute over
whether the worker is covered by the National Labor Relations Act.
FALSE
Difficulty: 1 Easy
8. (p. 8) Marco provides accounting services to the Consolidated Bank as an independent
contractor. Marco must pay his own Social Security (FICA), FICA excise, and federal
unemployment compensation (FUTA), taxes. However, Consolidated is responsible for
federal and state income tax withholdings.
FALSE
Difficulty: 1 Easy
9. (p. 11) Willful violations of FLSA subject an employer to criminal liability.
TRUE
Difficulty: 1 Easy
,10. (p. 8, 13) If an employer does not make any withholding from a worker's pay for taxes, then
the IRS deems the worker to be an independent contractor.
FALSE
Difficulty: 2 Medium
11. (p. 20) The Wonder City Restaurant uses a staffing firm to obtain temporary workers. After
the staffing firm sent over a temporary hostess, Wonder asked the firm to replace her with
someone of another race. If the hostess who was replaced proceeds with a Title VII claim,
Wonder cannot be liable because the temporary hostess was never its employee.
FALSE
Difficulty: 1 Easy
12. (p. 28) Non-compete agreements are governed by federal law.
FALSE
Difficulty: 2 Medium
13. (p. 26) The Civil Rights Act of 1866 applies to employers with 15 or more employees.
FALSE
Difficulty: 2 Medium
14. (p. 27) The Rehabilitation Act applies to federal contractors with contracts with the federal
government in excess of $10,000 annually.
TRUE
Difficulty: 2 Medium
, Multiple Choice Questions
15. (p. 7) ABC, Inc. solicited bids from various independent contractors to landscape the
grounds of its new office complex. Drew, head of facilities management told Patty, his
secretary, that he would not accept any bids from Hispanic contractors. Drew explained that
he would authorize hiring only American contractors to work on the grounds. A Hispanic
contractor brings a lawsuit against ABC for discrimination.
A. Drew's refusal to hire Hispanic companies is a violation of the Independent Contractors
Act of 2006.
B. Drew's refusal to hire Hispanic companies is a violation of Title VII of the Civil Rights
Act.
C. The Hispanic contractor cannot prevail in a discrimination case because Drew's
conversation with his secretary is confidential and cannot be used as evidence.
D. Drew's refusal to hire Hispanic companies is not a violation of Title VII of the Civil Rights
Act because that law does not cover discrimination against independent contractors.
Difficulty: 3 Hard
16. (p. 11) Ling frequently stocks shelves for Ace's Market on an as needed basis. Ace pays Ling
$5 per shelf. One day Ling falls off a broken ladder while stocking a shelf. Ling is seriously
injured:
A. If Ling is determined to be an independent contractor, he is eligible for workers'
compensation.
B. If Ling is determined to be an employee, he is eligible for workers' compensation.
C. Ling is eligible for workers' compensation whether he is an employee or an independent
contractor.
D. None of the above.
Difficulty: 2 Medium
17. (p. 12) The three main tests courts use to classify employees and independent contracts are:
A. Master-servant rule, Darden test, and economic realities test.
B. Master-servant rule, IRS 20-factor analysis, and hybrid analysis.
C. Common-law agency test, IRS 20-factor analysis, and economic realities test.
D. Common-law agency test, FedEx test, and hybrid analysis.
Difficulty: 1 Easy
