Blogs & Resources

By: Emily C. Williams, Esq.

Employers and employees, alike, are often unaware of the repercussions associated with how they are characterized in the workplace. When two persons agree that one will perform work for the other, the parties should be concerned with the legal significance of whether or not the arrangement creates an employer/employee relationship or an independent contractor relationship. Whether one arrangement exists can result in the following consequences: tax obligations — withholding, social security, and sales, prevailing wage rate obligations, indemnity and liability obligations for wrongful activities, insurance obligations and coverage issues and licensing. Furthermore, an employer is not held liable for the negligent acts of its independent contractors, except where the contractor injures someone to whom the employer owes a non-delegable duty of care, such as where the employer is a school authority and the injured party a pupil. An employer can also be held liable for the negligent selection of an independent contractor.

Frequently our clients ask us general questions regarding the day-to-day operations of their business. In order to prepare a client for how to form corporate policies reacting to sexual harassment claims, we first had to educate them on the process of how an aggrieved employee goes about pursuing a claim. What follows is an overview of the claim filing process. Knowing the process of how employee complaints are made will help your business in formulating a defense if that time should ever come.

When making business decisions on behalf of a corporation, it is presumed that corporate directors act in compliance with the above-referenced statute, by acting on an informed basis, in good faith and with ordinary care. This presumption is judicially created and is known as the business judgment rule. The business judgment rule is based on the premise that directors, for the most part, are more capable of making business decisions than are judges. Thus, where the rule is applicable, corporate directors will not be held liable for decisions made when conducting the business and affairs of a corporation.

Florida case law provides four elements which must be present for the business judgment rule to act as a shield to director liability: (a) the decision under review must be a business decision; (b) the director must not receive a personal benefit from the transaction ; (c) the director must exercise due care; and (d) the director must exercise good faith. F.D.I.C. v. Stahl, 854 F. Supp. 1565, 1570-1571 (S.D. Fla. 1994).

Therefore, the business judgment rule only protects directors only when they are carrying out their duties as directors, (e.g., making decisions and analyzing issues as directors). The business judgment rule is also inapplicable when the director furthers his self-interest. “A director is considered interested where he or she will receive a personal financial benefit from a transaction that is not equally shared by the stockholders, or will suffer a detrimental impact from the proposed transaction.” McCabe v. Foley, 424 F. Supp. 1315 (M.D. Fla. 2006).