{"id":129,"date":"2014-09-17T00:42:05","date_gmt":"2014-09-17T00:42:05","guid":{"rendered":"https:\/\/courses.candelalearning.com\/buslegalenv\/?post_type=chapter&p=129"},"modified":"2015-04-21T22:08:42","modified_gmt":"2015-04-21T22:08:42","slug":"14-3-cases","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/clinton-buslegalenv\/chapter\/14-3-cases\/","title":{"raw":"Cases","rendered":"Cases"},"content":{"raw":"

Creation of Agency: Liability of Parent for Contracts Made by \u201cAgent\u201d Child<\/h2>\r\n
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\r\n\r\nWeingart v. Directoire Restaurant, Inc.\r\n\r\n333 N.Y.S.2d 806 (N.Y., 1972)\r\n\r\nKASSEL, J.\r\n\r\nThe issue here is whether defendant restaurant by permitting an individual to park patrons\u2019 cars thereby held him out as its \u201cemployee\u201d for such purposes. Admittedly, this individual, one Buster Douglas, is not its employee in the usual sense but with the knowledge of defendant, he did station himself in front of its restaurant, wore a doorman\u2019s uniform and had been parking its customers\u2019 autos. The parties stipulated that if he were held to be defendant\u2019s employee, this created a bailment between the parties [and the \u201cemployer\u201d would have to rebut a presumption of negligence if the customer\u2019s property was not returned to the customer].\r\n\r\nOn April 20, 1968, at about 10 P.M., plaintiff drove his 1967 Cadillac Coupe de Ville to the door of the Directoire Restaurant at 160 East 48th Street in Manhattan. Standing in front of the door was Buster Douglas, dressed in a self-supplied uniform, comprised of a regular doorman\u2019s cap and matching jacket. Plaintiff gave the keys to his vehicle to Douglas and requested that he park the car. He gave Douglas a $1.00 tip and received a claim check. Plaintiff then entered defendant\u2019s restaurant, remained there for approximately 45 minutes and when he departed, Douglas was unable to locate the car which was never returned to plaintiff.\r\n\r\nAt the time of this occurrence, the restaurant had been open for only nine days, during which time plaintiff had patronized the restaurant on at least one prior occasion.\r\n\r\nDefendant did not maintain any sign at its entrance or elsewhere that it would provide parking for its customers (nor, apparently, any sign warning to the contrary).\r\n\r\nBuster Douglas parked cars for customers of defendant\u2019s restaurant and at least three or four other restaurants on the block. He stationed himself in front of each restaurant during the course of an evening and was so engaged during the evening of April 20, 1968. Defendant clearly knew of and did not object to Douglas\u2019 activities outside its restaurant. Defendant\u2019s witness testified at an examination before trial:\r\n
Q. Did anybody stand outside your restaurant in any capacity whatsoever?\r\n\r\nA. There was a man out there parking cars for the block, but he was in no way connected with us or anything like that. He parked cars for the Tamburlaine and also for the Chateau Madrid, Nepentha and a few places around the block.\r\n\r\nQ. Did you know that this gentleman was standing outside your restaurant?\r\n\r\nA. Yes, I knew he was there.\r\n\r\nQ. How did you know that he was standing outside your restaurant?\r\n\r\nA. Well, I knew the man\u2019s face because I used to work in a club on 55th Street and he was there. When we first opened up here, we didn\u2019t know if we would have a doorman or have parking facilities or what we were going to do at that time. We just let it hang and I told this Buster, Buster was his name, that you are a free agent and you do whatever you want to do. I am tending bar in the place and what you do in the street is up to you, I will not stop you, but we are not hiring you or anything like that, because at that time, we didn\u2019t know what we were going to use the parking lot or get a doorman and put on a uniform or what.<\/blockquote>\r\nThese facts establish to the court\u2019s satisfaction that, although Douglas was not an actual employee of the restaurant, defendant held him out as its authorized agent or \u201cemployee\u201d for the purpose of parking its customers\u2019 cars, by expressly consenting to his standing, in uniform, in front of its door to receive customers, to park their cars and issue receipts therefor\u2014which services were rendered without charge to the restaurant\u2019s customers, except for any gratuity paid to Douglas. Clearly, under these circumstances, apparent authority has been shown and Douglas acted within the scope of this authority.\r\n\r\nPlaintiff was justified in assuming that Douglas represented the restaurant in providing his services and that the restaurant had placed him there for the convenience of its customers. A restaurateur knows that this is the impression created by allowing a uniformed attendant to so act. Facility in parking is often a critical consideration for a motorist in selecting a restaurant in midtown Manhattan, and the Directoire was keenly aware of this fact as evidenced by its testimony that the management was looking into various other possibilities for solving customers\u2019 parking problems.\r\n\r\nThere was no suitable disclaimer posted outside the restaurant that it had no parking facilities or that entrusting one\u2019s car to any person was at the driver\u2019s risk. It is doubtful that any prudent driver would entrust his car to a strange person on the street, if he thought that the individual had no authorization from the restaurant or club or had no connection with it, but was merely an independent operator with questionable financial responsibility.\r\n\r\nThe fact that Douglas received no compensation directly from defendant is not material. Each party derived a benefit from the arrangement: Douglas being willing to work for gratuities from customers, and the defendant, at no cost to itself, presenting the appearance of providing the convenience of free parking and doorman services to its patrons. In any case, whatever private arrangements existed between the restaurant and Douglas were never disclosed to the customers.\r\n\r\nEven if such person did perform these services for several restaurants, it does not automatically follow that he is a freelance entrepreneur, since a shared employee working for other small or moderately sized restaurants in the area would seem a reasonable arrangement, in no way negating the authority of the attendant to act as doorman and receive cars for any one of these places individually.\r\n\r\nThe case most analogous to the instant one is Klotz v. El Morocco<\/em> [Citation, 1968], and plaintiff here relies on it. That case similarly involved the theft of a car parked by a uniformed individual standing in front of defendant\u2019s restaurant who, although not employed by it, parked vehicles for its patrons with the restaurant\u2019s knowledge and consent. Defendant here attempts to distinguish this case principally upon the ground that the parties in El Morocco stipulated<\/em> that the \u2018doorman\u2019 was an agent or employee of the defendant acting within the scope of his authority. However, the judge made an express finding to that effect: \u2018* * * there was sufficient evidence in plaintiff\u2019s case on which to find DiGiovanni, the man in the uniform, was acting within the scope of his authority as agent of defendant.\u201d Defendant here also points to the fact that in Klotz<\/em> DiGiovanni placed patrons\u2019 car keys on a rack inside El Morocco; however, this is only one fact to be considered in finding a bailment and is, to me, more relevant to the issue of the degree of care exercised.\r\n\r\nWhen defendant\u2019s agent failed to produce plaintiff\u2019s automobile, a presumption of negligence arose which now requires defendant to come forward with a sufficient explanation to rebut this presumption. [Citation] The matter should be set down for trial on the issues of due care and of damages.\r\n
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Case Questions<\/h3>\r\n
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    \r\n\t
  1. Buster Douglas was not the restaurant\u2019s employee. Why did the court determine his negligence could nevertheless be imputed to the restaurant?<\/li>\r\n\t
  2. The plaintiff in this case relied on Klotz<\/em>, very similar in facts, in which the car-parking attendant was<\/em> found to be an employee. The defendant, necessarily, needed to argue that the cases were not very similar. What argument did the defendant make? What did the court say about that argument?<\/li>\r\n\t
  3. The restaurant here is a bailee\u2014it has rightful possession of the plaintiff\u2019s (bailor\u2019s) property, the car. If the car is not returned to the plaintiff a rebuttable presumption of negligence arises. What does that mean?<\/li>\r\n<\/ol>\r\n<\/section><\/div>\r\n<\/div>\r\n
    \r\n

    Employee versus Independent Contractor<\/h2>\r\nVizcaino v. Microsoft Corp.\r\n\r\n97 F.3d 1187 (9th Cir. 1996)\r\n\r\nReinhardt, J.\r\n\r\nLarge corporations have increasingly adopted the practice of hiring temporary employees or independent contractors as a means of avoiding payment of employee benefits, and thereby increasing their profits. This practice has understandably led to a number of problems, legal and otherwise. One of the legal issues that sometimes arises is exemplified by this lawsuit. The named plaintiffs, who were classified by Microsoft as independent contractors, seek to strip that label of its protective covering and to obtain for themselves certain benefits that the company provided to all of its regular or permanent employees. After certifying the named plaintiffs as representatives of a class of \u201ccommon-law employees,\u201d the district court granted summary judgment to Microsoft on all counts. The plaintiffs\u2026now appeal as to two of their claims: a) the claim\u2026that they are entitled to savings benefits under Microsoft\u2019s Savings Plus Plan (SPP); and b) that\u2026they are entitled to stock-option benefits under Microsoft\u2019s Employee Stock Purchase Plan (ESPP). In both cases, the claims are based on their contention that they are common-law employees.<\/em>\r\n\r\nMicrosoft, one of the country\u2019s fastest growing and most successful corporations and the world\u2019s largest software company, produces and sells computer software internationally. It employs a core staff of permanent employees. It categorizes them as \u201cregular employees\u201d and offers them a wide variety of benefits, including paid vacations, sick leave, holidays, short-term disability, group health and life insurance, and pensions, as well as the two benefits involved in this appeal. Microsoft supplements its core staff of employees with a pool of individuals to whom it refuses to pay fringe benefits. It previously classified these individuals as \u201cindependent contractors\u201d or \u201cfreelancers,\u201d but prior to the filing of the action began classifying them as \u201ctemporary agency employees.\u201d Freelancers were hired when Microsoft needed to expand its workforce to meet the demands of new product schedules. The company did not, of course, provide them with any of the employee benefits regular employees receive.\r\n\r\nThe plaintiffs\u2026performed services as software testers, production editors, proofreaders, formatters and indexers. Microsoft fully integrated the plaintiffs into its workforce: they often worked on teams along with regular employees, sharing the same supervisors, performing identical functions, and working the same core hours. Because Microsoft required that they work on site, they received admittance card keys, office equipment and supplies from the company.\r\n\r\nFreelancers and regular employees, however, were not without their obvious distinctions. Freelancers wore badges of a different color, had different electronic-mail addresses, and attended a less formal orientation than that provided to regular employees. They were not permitted to assign their work to others, invited to official company functions, or paid overtime wages. In addition, they were not paid through Microsoft\u2019s payroll department. Instead, they submitted invoices for their services, documenting their hours and the projects on which they worked, and were paid through the accounts receivable department.\r\n\r\nThe plaintiffs were told when they were hired that, as freelancers, they would not be eligible for benefits. None has contended that Microsoft ever promised them any benefits individually. All eight named plaintiffs signed [employment agreements] when first hired by Microsoft or soon thereafter. [One] included a provision that states that the undersigned \u201cagrees to be responsible for all federal and state taxes, withholding, social security, insurance and other benefits.\u201d The [other one] states that \u201cas an Independent Contractor to Microsoft, you are self-employed and are responsible to pay all your own insurance and benefits.\u201d Eventually, the plaintiffs learned of the various benefits being provided to regular employees from speaking with them or reading various Microsoft publications concerning employee benefits.\r\n\r\nIn 1989 and 1990, the Internal Revenue Service (IRS)[,]\u2026applying common-law principles defining the employer-employee relationship, concluded that Microsoft\u2019s freelancers were not independent contractors but employees for withholding and employment tax purposes, and that Microsoft would thereafter be required to pay withholding taxes and the employer\u2019s portion of Federal Insurance Contribution Act (FICA) tax. Microsoft agreed.\u2026\r\n\r\nAfter learning of the IRS rulings, the plaintiffs sought various employee benefits, including those now at issue: the ESPP and SPP benefits. The SPP\u2026is a cash or deferred salary arrangement under \u00a7 401k of the Internal Revenue Code that permits Microsoft\u2019s employees to save and invest up to fifteen percent of their income through tax-deferred payroll deductions.\u2026Microsoft matches fifty percent of the employee\u2019s contribution in any year, with [a maximum matching contribution]. The ESPP\u2026permits employees to purchase company stock [with various rules].\r\n\r\nMicrosoft rejected the plaintiffs\u2019 claims for benefits, maintaining that they were independent contractors who were personally responsible for all their own benefits.\u2026\r\n\r\nThe plaintiffs brought this action, challenging the denial of benefits.\r\n\r\nMicrosoft contends that the extrinsic evidence, including the [employment agreements], demonstrates its intent not to provide freelancers or independent contractors with employee benefits[.]\u2026We have no doubt that the company did not intend to provide freelancers or independent contractors with employee benefits, and that if the plaintiffs had in fact been freelancers or independent contractors, they would not be eligible under the plan. The plaintiffs, however, were not freelancers or independent contractors. They were common-law employees, and the question is what, if anything, Microsoft intended with respect to persons who were actually common-law employees but were not known to Microsoft to be such. The fact that Microsoft did not intend to provide benefits to persons who it thought were freelancers or independent contractors sheds little or no light on that question.\u2026\r\n\r\nMicrosoft\u2019s argument, drawing a distinction between common-law employees on the basis of the manner in which they were paid, is subject to the same vice as its more general argument. Microsoft regarded the plaintiffs as independent contractors during the relevant period and learned of their common-law-employee status only after the IRS examination. They were paid through the accounts receivable department rather than the payroll department because of Microsoft\u2019s mistaken view as to their legal status. Accordingly, Microsoft cannot now contend that the fact that they were paid through the accounts receivable department demonstrates that the company intended to deny them the benefits received by all common-law employees regardless of their actual employment status. Indeed, Microsoft has pointed to no evidence suggesting that it ever denied eligibility to any employees, whom it understood<\/em> to be common-law employees, by paying them through the accounts receivable department or otherwise.\r\n\r\nWe therefore construe the ambiguity in the plan against Microsoft and hold that the plaintiffs are eligible to participate under the terms of the SPP.\r\n\r\n[Next, regarding the ESPP] we hold that the plaintiffs\u2026are covered by the specific provisions of the ESPP. We apply the \u201cobjective manifestation theory of contracts,\u201d which requires us to \u201cimpute an intention corresponding to the reasonable meaning of a person\u2019s words and acts.\u201d [Citation] Through its incorporation of the tax code provision into the plan, Microsoft manifested an objective intent to make all common-law employees, and hence the plaintiffs, eligible for participation. The ESPP specifically provides:\r\n
    It is the intention of the Company to have the Plan qualify as an \u201cemployee stock purchase plan\u201d under Section 423 of the Internal Revenue Code of 1954. The provisions of the Plan shall, accordingly, be construed so as to extend and limit participation in a manner consistent with the requirements of that Section of the Code.<\/em> (emphasis added)<\/blockquote>\r\n[T]he ESPP, when construed in a manner consistent with the requirements of \u00a7 423, extends participation to all common-law employees not covered by one of the express exceptions set forth in the plan. Accordingly, we find that the ESPP, through its incorporation of \u00a7 423, expressly extends eligibility for participation to the plaintiff class and affords them the same options to acquire stock in the corporation as all other employees.\r\n\r\nMicrosoft next contends that the [employment agreements] signed by the plaintiffs render them ineligible to participate in the ESPP. First, the label used in the instruments signed by the plaintiffs does not control their employment status. Second, the employment instruments, if construed to exclude the plaintiffs from receiving ESPP benefits, would conflict with the plan\u2019s express incorporation of \u00a7 423. Although Microsoft may have generally intended to exclude individuals who were in fact independent contractors, it could not, consistent with its express intention to extend participation in the ESPP to all common-law employees, have excluded the plaintiffs. Indeed, such an exclusion would defeat the purpose of including \u00a7 423 in the plan, because the exclusion of common-law employees not otherwise accepted would result in the loss of the plan\u2019s tax qualification.\r\n\r\nFinally, Microsoft maintains that the plaintiffs are not entitled to ESPP benefits because the terms of the plan were never communicated to them and they were therefore unaware of its provisions when they performed their employment services.\u2026In any event, to the extent that knowledge of an offer of benefits is a prerequisite, it is probably sufficient that Microsoft publicly promulgated the plan. In [Citation], the plaintiff was unaware of the company\u2019s severance plan until shortly before his termination. The Oklahoma Supreme Court concluded nonetheless that publication of the plan was \u201cthe equivalent of constructive knowledge on the part of all<\/em> employees not specifically excluded.\u201d\r\n\r\nWe are not required to rely, however, on the [this] analysis or even on Microsoft\u2019s own unwitting concession. There is a compelling reason, implicit in some of the preceding discussion, that requires us to reject the company\u2019s theory that the plaintiffs\u2019 entitlement to ESPP benefits is defeated by their previous lack of knowledge regarding their rights. It is \u201cwell established\u201d that an optionor may not rely on an optionee\u2019s failure to exercise an option when he has committed any act or failed to perform any duty \u201ccalculated to cause the optionee to delay in exercising the right.\u201d [Citation] \u201c[T]he optionor may not make statements or representations calculated to cause delay, [or] fail to furnish [necessary] information.\u2026\u201d Similarly, \u201c[I]t is a principle of fundamental justice that if a promisor is himself the cause of the failure of performance, either of an obligation due him or of a condition upon which his own liability depends, he cannot take advantage of the failure.\u201d [Citation]\u2026\r\n\r\nApplying these principles, we agree with the magistrate judge, who concluded that Microsoft, which created a benefit to which the plaintiffs were entitled, could not defend itself by arguing that the plaintiffs were unaware of the benefit, when its own false representations precluded them from gaining that knowledge. Because Microsoft misrepresented both the plaintiffs\u2019 actual employment status and their eligibility to participate in the ESPP, it is responsible for their failure to know that they were covered by the terms of the offer. It may not now take advantage of that failure to defeat the plaintiffs\u2019 rights to ESPP benefits. Thus, we reject Microsoft\u2019s final argument.\r\n

    Conclusion<\/h3>\r\nFor the reasons stated, the district court\u2019s grant of summary judgment in favor of Microsoft and denial of summary judgment in favor of the plaintiffs is REVERSED and the case REMANDED for the determination of any questions of individual eligibility for benefits that may remain following issuance of this opinion and for calculation of the damages or benefits due the various class members.\r\n
    \r\n

    Case Questions<\/h3>\r\n
    \r\n
      \r\n\t
    1. In a 1993 Wall Street Journal<\/em> article, James Bovard asserted that the IRS \u201cis carrying out a sweeping campaign to slash the number of Americans permitted to be self-employed\u2014and to punish the companies that contract with them\u2026IRS officials indicate that more than half the nation\u2019s self-employed should no longer be able to work for themselves.\u201d Why did Microsoft want these employees to \u201cbe able to work for themselves\u201d?<\/li>\r\n\t
    2. Why did the employees accept employment as independent contractors?<\/li>\r\n\t
    3. It seems unlikely that the purpose of the IRS\u2019s campaign was really to keep people from working for themselves, despite Mr. Bovard\u2019s assumption. What was the purpose of the campaign?<\/li>\r\n\t
    4. Why did the IRS and the court determine that these \u201cindependent contractors\u201d were in fact employees?<\/li>\r\n<\/ol>\r\n<\/section><\/div>\r\n<\/div>\r\n
      \r\n

      Breach of Fiduciary Duty<\/h2>\r\nBacon v. Volvo Service Center, Inc.\r\n\r\n597 S.E.2d 440 (Ga. App. 2004)\r\n\r\nSmith, J.\r\n\r\n[This appeal is] taken in an action that arose when two former employees left an existing business and began a new, competing business.\u2026Bacon and Johnson, two former employees of Volvo Service Center, Inc. (VSC), and the new company they formed, South Gwinnett Volvo Service, Ltd. (SGVS), appeal from the trial court\u2019s denial of their motion for judgment notwithstanding the jury\u2019s verdict in favor of VSC.\u2026\r\n\r\nVSC filed suit against appellants, alleging a number of claims arising from the use by Bacon, who had been a service technician at VSC, of VSC\u2019s customer list, and his soliciting Johnson, a service writer, and another VSC employee to join SGVS. SGVS moved for a directed verdict on certain claims at the close of plaintiff\u2019s evidence and at the close of the case, which motions were denied. The jury was asked to respond to specific interrogatories, and it found for VSC and against all three appellants on VSC\u2019s claim for misappropriation of trade secrets. The jury also found for plaintiff against Bacon for breach of fiduciary duty,\u2026tortious interference with business relations, employee piracy, and conversion of corporate assets. The jury awarded VSC attorney fees, costs, and exemplary damages stemming from the claim for misappropriation of trade secrets. Judgment was entered on the jury\u2019s verdict, and appellants\u2019 motion for j.n.o.v. was denied. This appeal ensued. We find that VSC did not meet its burden of proof as to the claims for misappropriation of trade secrets, breach of fiduciary duty, or employee piracy, and the trial court should have granted appellants\u2019 motion for j.n.o.v.\r\n\r\nConstrued to support the jury\u2019s verdict, the evidence of record shows that Bacon was a technician at VSC when he decided to leave and open a competing business. Before doing so, he printed a list of VSC\u2019s customers from one of VSC\u2019s two computers. Computer access was not password restricted, was easy to use, and was used by many employees from time to time.\r\n\r\nAbout a year after he left VSC, Bacon gave Johnson and another VSC employee an offer of employment at his new Volvo repair shop, which was about to open. Bacon and Johnson advertised extensively, and the customer list was used to send flyers to some VSC customers who lived close to the new shop\u2019s location. These activities became the basis for VSC\u2019s action against Bacon, Johnson, and their new shop, SGVS.\u2026\r\n\r\n1. The Georgia Trade Secrets Act of 1990, [Citation], defines a \u201ctrade secret\u201d as\r\n
      information, without regard to form, including, but not limited to,\u2026a list of actual or potential customers or suppliers which is not commonly known by or available to the public and which information:\r\n\r\n(A) Derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and\r\n\r\n(B) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.<\/blockquote>\r\nIf an employer does not prove both prongs of this test, it is not entitled to protection under the Act. Our Supreme Court held in [Citation, 1991] for instance, that information was not a trade secret within the meaning of the Act because no evidence showed that the employer \u201cmade reasonable efforts under the circumstances\u2026to maintain the confidentiality of the information it sought to protect.\u201d\r\n\r\nWhile a client list may be subject to confidential treatment under the Georgia Trade Secrets Act, the information itself is not inherently confidential. Customers are not trade secrets. Confidentiality is afforded only where the customer list is not generally known or ascertainable from other sources and was the subject of reasonable efforts to maintain its secrecy.\u2026\r\n\r\nHere, VSC took no<\/em> precautions to maintain the confidentiality of its customer list. The information was on both computers, and it was not password-protected. Moreover, the same information was available to the technicians through the repair orders, which they were permitted to retain indefinitely while Bacon was employed there. Employees were not informed that the information was confidential. Neither Bacon nor Johnson was required to sign a confidentiality agreement as part of his employment.\r\n\r\nBecause no evidence was presented from which the jury could have concluded that VSC took any steps, much less reasonable ones, to protect the confidentiality of its customer list, a material requirement for trade secret status was not satisfied. The trial court should have granted appellants\u2019 motion for j.n.o.v.\r\n\r\n2. To prove tortious interference with business relations, \u201ca plaintiff must show defendant: (1) acted improperly and without privilege, (2) acted purposely and with malice with the intent to injure, (3) induced a third party or parties not to enter into or continue a business relationship with the plaintiff, and (4) caused plaintiff financial injury.\u201d [Citation] But \u201c[f]air competition is always legal.\u201d [Citations] Unless an employee has executed a valid non-compete or non-solicit covenant, he is not barred from soliciting customers of his former employer on behalf of a new employer. [Citation]\r\n\r\nNo evidence was presented that Bacon acted \u201cimproperly,\u201d that any of VSC\u2019s former customers switched to SGVS because of any improper act by Bacon, or that these customers would have continued to patronize VSC but for Bacon\u2019s solicitations. Therefore, it was impossible for a jury to calculate VSC\u2019s financial damage, if any existed.\r\n\r\n3. With regard to VSC\u2019s claim for breach of fiduciary duty, \u201c[a]n employee breaches no fiduciary duty to the employer simply by making plans to enter a competing business while he is still employed. Even before the termination of his agency, he is entitled to make arrangements to compete and upon termination of employment immediately compete.\u201d [Citation] He cannot solicit customers for a rival business or do other, similar acts in direct competition with his employer\u2019s business before his employment ends. But here, no evidence was presented to rebut the evidence given by Bacon and Johnson that they engaged in no such practices before their employment with VSC ended. Even assuming, therefore, that a fiduciary relationship existed, no evidence was presented showing that it was breached.\r\n\r\n4. The same is true for VSC\u2019s claim for employee piracy. The evidence simply does not show that any employees of VSC were solicited for SGVS before Bacon left VSC\u2019s employ.\u2026\r\n\r\nJudgment reversed.\r\n
      \r\n

      Case Questions<\/h3>\r\n
      \r\n
        \r\n\t
      1. Why was it determined that the defendants were not liable for any breach of trade secrecy?<\/li>\r\n\t
      2. What would have been necessary to show tortious interference with business relations?<\/li>\r\n\t
      3. The evidence was lacking that there was any breach of fiduciary duty. What would have been necessary to show that?<\/li>\r\n\t
      4. What is \u201cemployee piracy\u201d? Why was it not proven?<\/li>\r\n<\/ol>\r\n<\/section><\/div>\r\n

        \u00a0Workers\u2019 Compensation: What \u201cInjuries\u201d Are Compensable?<\/h2>\r\n<\/div>\r\n
        \r\n\r\nWolfe v. Sibley, Lindsay & Curr Co.\r\n\r\n330 N.E.2d 603 (N.Y. 1975)\r\n\r\nWachtler, J.\r\n\r\nThis appeal involves a claim for workmen\u2019s compensation benefits for the period during which the claimant was incapacitated by severe depression caused by the discovery of her immediate supervisor\u2019s body after he had committed suicide.\r\n\r\nThe facts as adduced at a hearing before the Workmen\u2019s Compensation Board are uncontroverted. The claimant, Mrs. Diana Wolfe, began her employment with the respondent department store, Sibley, Lindsay & Curr Co. in February, 1968. After working for some time as an investigator in the security department of the store she became secretary to Mr. John Gorman, the security director. It appears from the record that as head of security, Mr. Gorman was subjected to intense pressure, especially during the Christmas holidays. Mrs. Wolfe testified that throughout the several years she worked at Sibley\u2019s Mr. Gorman reacted to this holiday pressure by becoming extremely agitated and nervous. She noted, however, that this anxiety usually disappeared when the holiday season was over. Unfortunately, Mr. Gorman\u2019s nervous condition failed to abate after the 1970 holidays.\u2026\r\n\r\nDespite the fact that he followed Mrs. Wolfe\u2019s advice to see a doctor, Mr. Gorman\u2019s mental condition continued to deteriorate. On one occasion he left work at her suggestion because he appeared to be so nervous. This condition persisted until the morning of June 9, 1971 when according to the claimant, Mr. Gorman looked much better and even smiled and \u2018tousled her hair\u2019 when she so remarked.\r\n\r\nA short time later Mr. Gorman called her on the intercom and asked her to call the police to room 615. Mrs. Wolfe complied with this request and then tried unsuccessfully to reach Mr. Gorman on the intercom. She entered his office to find him lying in a pool of blood caused by a self-inflicted gunshot wound in the head. Mrs. Wolfe became extremely upset and was unable to continue working that day.\r\n\r\nShe returned to work for one week only to lock herself in her office to avoid the questions of her fellow workers. Her private physician perceiving that she was beset by feelings of guilt referred her to a psychiatrist and recommended that she leave work, which she did. While at home she ruminated about her guilt in failing to prevent the suicide and remained in bed for long periods of time staring at the ceiling. The result was that she became unresponsive to her husband and suffered a weight loss of 20 pounds. Her psychiatrist, Dr. Grinols diagnosed her condition as an acute depressive reaction.\r\n\r\nAfter attempting to treat her in his office Dr. Grinols realized that the severity of her depression mandated hospitalization. Accordingly, the claimant was admitted to the hospital on July 9, 1971 where she remained for two months during which time she received psychotherapy and medication. After she was discharged, Dr. Grinols concluded that there had been no substantial remission in her depression and ruminative guilt and so had her readmitted for electroshock treatment. These treatments lasted for three weeks and were instrumental in her recovery. She was again discharged and, in mid-January, 1972, resumed her employment with Sibley, Lindsay & Curr.\r\n\r\nMrs. Wolfe\u2019s claim for workmen\u2019s compensation was granted by the referee and affirmed by the Workmen\u2019s Compensation Board. On appeal the Appellate Division reversed citing its opinions in [Citations], [concluding]\u2026that mental injury precipitated solely by psychic trauma is not compensable as a matter of law. We do not agree with this conclusion.\r\n\r\nWorkmen\u2019s compensation, as distinguished from tort liability which is essentially based on fault, is designed to shift the risk of loss of earning capacity caused by industrial accidents from the worker to industry and ultimately the consumer. In light of its beneficial and remedial character the Workmen\u2019s Compensation Law should be construed liberally in favor of the employee [Citation].\r\n\r\nLiability under the act is predicated on accidental injury arising out of and in the course of employment.\u2026Applying these concepts to the case at bar we note that there is no issue raised concerning the causal relationship between the occurrence and the injury. The only testimony on this matter was given by Dr. Grinols who stated unequivocally that the discovery of her superior\u2019s body was the competent producing cause of her condition. Nor is there any question as to the absence of physical impact. Accordingly, the focus of our inquiry is whether or not there has been an accidental injury within the meaning of the Workmen\u2019s Compensation Law.\r\n\r\nSince there is no statutory definition of this term we turn to the relevant decisions. These may be divided into three categories: (1) psychic trauma which produces physical injury, (2) physical impact which produces psychological injury, and (3) psychic trauma which produces psychological injury. As to the first class our court has consistently recognized the principle that an injury caused by emotional stress or shock may be accidental within the purview of the compensation law. [Citation] Cases falling into the second category have uniformly sustained awards to those incurring nervous or psychological disorders as a result of physical impact [Citation]. As to those cases in the third category the decisions are not as clear.\u2026\r\n\r\nWe hold today that psychological or nervous injury precipitated by psychic trauma is compensable to the same extent as physical injury. This determination is based on two considerations. First, as noted in the psychiatric testimony there is nothing in the nature of a stress or shock situation which ordains physical as opposed to psychological injury. The determinative factor is the particular vulnerability of an individual by virtue of his physical makeup. In a given situation one person may be susceptible to a heart attack while another may suffer a depressive reaction. In either case the result is the same\u2014the individual is incapable of functioning properly because of an accident and should be compensated under the Workmen\u2019s Compensation Law.\r\n\r\nSecondly, having recognized the reliability of identifying psychic trauma as a causative factor of injury in some cases and the reliability by identifying psychological injury as a resultant factor in other cases, we see no reason for limiting recovery in the latter instance to cases involving physical impact. There is nothing talismanic about physical impact.\r\n\r\nWe would note in passing that this analysis reflects the view of the majority of jurisdictions in this country and England. [Citations]\u2026\r\n\r\nAccordingly, the order appealed from should be reversed and the award to the claimant reinstated, with costs.\r\n
        \r\n

        Case Questions<\/h3>\r\n
        \r\n
          \r\n\t
        1. Why did the appeals court deny workers\u2019 compensation benefits for Wolfe?<\/li>\r\n\t
        2. On what reasoning did the New York high court reverse?<\/li>\r\n\t
        3. There was a dissent in this case (not included here). Judge Breitel noted that the evidence was that Mrs. Wolfe had a psychological condition such that her trauma \u201ccould never have occurred unless she, to begin with, was extraordinarily vulnerable to severe shock at or away from her place of employment or one produced by accident or injury to those close to her in employment or in her private life.\u201d The judge worried that \u201cone can easily call up a myriad of commonplace occupational pursuits where employees are often exposed to the misfortunes of others which may in the mentally unstable evoke precisely the symptoms which this claimant suffered.\u201d He concluded, \u201cIn an era marked by examples of overburdening of socially desirable programs with resultant curtailment or destruction of such programs, a realistic assessment of impact of doctrine is imperative. An overburdening of the compensation system by injudicious and open-ended expansion of compensation benefits, especially for costly, prolonged, and often only ameliorative psychiatric care, cannot but threaten its soundness or that of the enterprises upon which it depends.\u201d What is the concern here?<\/li>\r\n<\/ol>\r\n<\/section><\/div>\r\n
          <\/div>\r\n<\/div>\r\n<\/div>","rendered":"

          Creation of Agency: Liability of Parent for Contracts Made by \u201cAgent\u201d Child<\/h2>\n
          \n
          \n

          Weingart v. Directoire Restaurant, Inc.<\/p>\n

          333 N.Y.S.2d 806 (N.Y., 1972)<\/p>\n

          KASSEL, J.<\/p>\n

          The issue here is whether defendant restaurant by permitting an individual to park patrons\u2019 cars thereby held him out as its \u201cemployee\u201d for such purposes. Admittedly, this individual, one Buster Douglas, is not its employee in the usual sense but with the knowledge of defendant, he did station himself in front of its restaurant, wore a doorman\u2019s uniform and had been parking its customers\u2019 autos. The parties stipulated that if he were held to be defendant\u2019s employee, this created a bailment between the parties [and the \u201cemployer\u201d would have to rebut a presumption of negligence if the customer\u2019s property was not returned to the customer].<\/p>\n

          On April 20, 1968, at about 10 P.M., plaintiff drove his 1967 Cadillac Coupe de Ville to the door of the Directoire Restaurant at 160 East 48th Street in Manhattan. Standing in front of the door was Buster Douglas, dressed in a self-supplied uniform, comprised of a regular doorman\u2019s cap and matching jacket. Plaintiff gave the keys to his vehicle to Douglas and requested that he park the car. He gave Douglas a $1.00 tip and received a claim check. Plaintiff then entered defendant\u2019s restaurant, remained there for approximately 45 minutes and when he departed, Douglas was unable to locate the car which was never returned to plaintiff.<\/p>\n

          At the time of this occurrence, the restaurant had been open for only nine days, during which time plaintiff had patronized the restaurant on at least one prior occasion.<\/p>\n

          Defendant did not maintain any sign at its entrance or elsewhere that it would provide parking for its customers (nor, apparently, any sign warning to the contrary).<\/p>\n

          Buster Douglas parked cars for customers of defendant\u2019s restaurant and at least three or four other restaurants on the block. He stationed himself in front of each restaurant during the course of an evening and was so engaged during the evening of April 20, 1968. Defendant clearly knew of and did not object to Douglas\u2019 activities outside its restaurant. Defendant\u2019s witness testified at an examination before trial:<\/p>\n

          Q. Did anybody stand outside your restaurant in any capacity whatsoever?<\/p>\n

          A. There was a man out there parking cars for the block, but he was in no way connected with us or anything like that. He parked cars for the Tamburlaine and also for the Chateau Madrid, Nepentha and a few places around the block.<\/p>\n

          Q. Did you know that this gentleman was standing outside your restaurant?<\/p>\n

          A. Yes, I knew he was there.<\/p>\n

          Q. How did you know that he was standing outside your restaurant?<\/p>\n

          A. Well, I knew the man\u2019s face because I used to work in a club on 55th Street and he was there. When we first opened up here, we didn\u2019t know if we would have a doorman or have parking facilities or what we were going to do at that time. We just let it hang and I told this Buster, Buster was his name, that you are a free agent and you do whatever you want to do. I am tending bar in the place and what you do in the street is up to you, I will not stop you, but we are not hiring you or anything like that, because at that time, we didn\u2019t know what we were going to use the parking lot or get a doorman and put on a uniform or what.<\/p><\/blockquote>\n

          These facts establish to the court\u2019s satisfaction that, although Douglas was not an actual employee of the restaurant, defendant held him out as its authorized agent or \u201cemployee\u201d for the purpose of parking its customers\u2019 cars, by expressly consenting to his standing, in uniform, in front of its door to receive customers, to park their cars and issue receipts therefor\u2014which services were rendered without charge to the restaurant\u2019s customers, except for any gratuity paid to Douglas. Clearly, under these circumstances, apparent authority has been shown and Douglas acted within the scope of this authority.<\/p>\n

          Plaintiff was justified in assuming that Douglas represented the restaurant in providing his services and that the restaurant had placed him there for the convenience of its customers. A restaurateur knows that this is the impression created by allowing a uniformed attendant to so act. Facility in parking is often a critical consideration for a motorist in selecting a restaurant in midtown Manhattan, and the Directoire was keenly aware of this fact as evidenced by its testimony that the management was looking into various other possibilities for solving customers\u2019 parking problems.<\/p>\n

          There was no suitable disclaimer posted outside the restaurant that it had no parking facilities or that entrusting one\u2019s car to any person was at the driver\u2019s risk. It is doubtful that any prudent driver would entrust his car to a strange person on the street, if he thought that the individual had no authorization from the restaurant or club or had no connection with it, but was merely an independent operator with questionable financial responsibility.<\/p>\n

          The fact that Douglas received no compensation directly from defendant is not material. Each party derived a benefit from the arrangement: Douglas being willing to work for gratuities from customers, and the defendant, at no cost to itself, presenting the appearance of providing the convenience of free parking and doorman services to its patrons. In any case, whatever private arrangements existed between the restaurant and Douglas were never disclosed to the customers.<\/p>\n

          Even if such person did perform these services for several restaurants, it does not automatically follow that he is a freelance entrepreneur, since a shared employee working for other small or moderately sized restaurants in the area would seem a reasonable arrangement, in no way negating the authority of the attendant to act as doorman and receive cars for any one of these places individually.<\/p>\n

          The case most analogous to the instant one is Klotz v. El Morocco<\/em> [Citation, 1968], and plaintiff here relies on it. That case similarly involved the theft of a car parked by a uniformed individual standing in front of defendant\u2019s restaurant who, although not employed by it, parked vehicles for its patrons with the restaurant\u2019s knowledge and consent. Defendant here attempts to distinguish this case principally upon the ground that the parties in El Morocco stipulated<\/em> that the \u2018doorman\u2019 was an agent or employee of the defendant acting within the scope of his authority. However, the judge made an express finding to that effect: \u2018* * * there was sufficient evidence in plaintiff\u2019s case on which to find DiGiovanni, the man in the uniform, was acting within the scope of his authority as agent of defendant.\u201d Defendant here also points to the fact that in Klotz<\/em> DiGiovanni placed patrons\u2019 car keys on a rack inside El Morocco; however, this is only one fact to be considered in finding a bailment and is, to me, more relevant to the issue of the degree of care exercised.<\/p>\n

          When defendant\u2019s agent failed to produce plaintiff\u2019s automobile, a presumption of negligence arose which now requires defendant to come forward with a sufficient explanation to rebut this presumption. [Citation] The matter should be set down for trial on the issues of due care and of damages.<\/p>\n

          \n

          Case Questions<\/h3>\n
          \n
            \n
          1. Buster Douglas was not the restaurant\u2019s employee. Why did the court determine his negligence could nevertheless be imputed to the restaurant?<\/li>\n
          2. The plaintiff in this case relied on Klotz<\/em>, very similar in facts, in which the car-parking attendant was<\/em> found to be an employee. The defendant, necessarily, needed to argue that the cases were not very similar. What argument did the defendant make? What did the court say about that argument?<\/li>\n
          3. The restaurant here is a bailee\u2014it has rightful possession of the plaintiff\u2019s (bailor\u2019s) property, the car. If the car is not returned to the plaintiff a rebuttable presumption of negligence arises. What does that mean?<\/li>\n<\/ol>\n<\/section>\n<\/div>\n<\/div>\n
            \n

            Employee versus Independent Contractor<\/h2>\n

            Vizcaino v. Microsoft Corp.<\/p>\n

            97 F.3d 1187 (9th Cir. 1996)<\/p>\n

            Reinhardt, J.<\/p>\n

            Large corporations have increasingly adopted the practice of hiring temporary employees or independent contractors as a means of avoiding payment of employee benefits, and thereby increasing their profits. This practice has understandably led to a number of problems, legal and otherwise. One of the legal issues that sometimes arises is exemplified by this lawsuit. The named plaintiffs, who were classified by Microsoft as independent contractors, seek to strip that label of its protective covering and to obtain for themselves certain benefits that the company provided to all of its regular or permanent employees. After certifying the named plaintiffs as representatives of a class of \u201ccommon-law employees,\u201d the district court granted summary judgment to Microsoft on all counts. The plaintiffs\u2026now appeal as to two of their claims: a) the claim\u2026that they are entitled to savings benefits under Microsoft\u2019s Savings Plus Plan (SPP); and b) that\u2026they are entitled to stock-option benefits under Microsoft\u2019s Employee Stock Purchase Plan (ESPP). In both cases, the claims are based on their contention that they are common-law employees.<\/em><\/p>\n

            Microsoft, one of the country\u2019s fastest growing and most successful corporations and the world\u2019s largest software company, produces and sells computer software internationally. It employs a core staff of permanent employees. It categorizes them as \u201cregular employees\u201d and offers them a wide variety of benefits, including paid vacations, sick leave, holidays, short-term disability, group health and life insurance, and pensions, as well as the two benefits involved in this appeal. Microsoft supplements its core staff of employees with a pool of individuals to whom it refuses to pay fringe benefits. It previously classified these individuals as \u201cindependent contractors\u201d or \u201cfreelancers,\u201d but prior to the filing of the action began classifying them as \u201ctemporary agency employees.\u201d Freelancers were hired when Microsoft needed to expand its workforce to meet the demands of new product schedules. The company did not, of course, provide them with any of the employee benefits regular employees receive.<\/p>\n

            The plaintiffs\u2026performed services as software testers, production editors, proofreaders, formatters and indexers. Microsoft fully integrated the plaintiffs into its workforce: they often worked on teams along with regular employees, sharing the same supervisors, performing identical functions, and working the same core hours. Because Microsoft required that they work on site, they received admittance card keys, office equipment and supplies from the company.<\/p>\n

            Freelancers and regular employees, however, were not without their obvious distinctions. Freelancers wore badges of a different color, had different electronic-mail addresses, and attended a less formal orientation than that provided to regular employees. They were not permitted to assign their work to others, invited to official company functions, or paid overtime wages. In addition, they were not paid through Microsoft\u2019s payroll department. Instead, they submitted invoices for their services, documenting their hours and the projects on which they worked, and were paid through the accounts receivable department.<\/p>\n

            The plaintiffs were told when they were hired that, as freelancers, they would not be eligible for benefits. None has contended that Microsoft ever promised them any benefits individually. All eight named plaintiffs signed [employment agreements] when first hired by Microsoft or soon thereafter. [One] included a provision that states that the undersigned \u201cagrees to be responsible for all federal and state taxes, withholding, social security, insurance and other benefits.\u201d The [other one] states that \u201cas an Independent Contractor to Microsoft, you are self-employed and are responsible to pay all your own insurance and benefits.\u201d Eventually, the plaintiffs learned of the various benefits being provided to regular employees from speaking with them or reading various Microsoft publications concerning employee benefits.<\/p>\n

            In 1989 and 1990, the Internal Revenue Service (IRS)[,]\u2026applying common-law principles defining the employer-employee relationship, concluded that Microsoft\u2019s freelancers were not independent contractors but employees for withholding and employment tax purposes, and that Microsoft would thereafter be required to pay withholding taxes and the employer\u2019s portion of Federal Insurance Contribution Act (FICA) tax. Microsoft agreed.\u2026<\/p>\n

            After learning of the IRS rulings, the plaintiffs sought various employee benefits, including those now at issue: the ESPP and SPP benefits. The SPP\u2026is a cash or deferred salary arrangement under \u00a7 401k of the Internal Revenue Code that permits Microsoft\u2019s employees to save and invest up to fifteen percent of their income through tax-deferred payroll deductions.\u2026Microsoft matches fifty percent of the employee\u2019s contribution in any year, with [a maximum matching contribution]. The ESPP\u2026permits employees to purchase company stock [with various rules].<\/p>\n

            Microsoft rejected the plaintiffs\u2019 claims for benefits, maintaining that they were independent contractors who were personally responsible for all their own benefits.\u2026<\/p>\n

            The plaintiffs brought this action, challenging the denial of benefits.<\/p>\n

            Microsoft contends that the extrinsic evidence, including the [employment agreements], demonstrates its intent not to provide freelancers or independent contractors with employee benefits[.]\u2026We have no doubt that the company did not intend to provide freelancers or independent contractors with employee benefits, and that if the plaintiffs had in fact been freelancers or independent contractors, they would not be eligible under the plan. The plaintiffs, however, were not freelancers or independent contractors. They were common-law employees, and the question is what, if anything, Microsoft intended with respect to persons who were actually common-law employees but were not known to Microsoft to be such. The fact that Microsoft did not intend to provide benefits to persons who it thought were freelancers or independent contractors sheds little or no light on that question.\u2026<\/p>\n

            Microsoft\u2019s argument, drawing a distinction between common-law employees on the basis of the manner in which they were paid, is subject to the same vice as its more general argument. Microsoft regarded the plaintiffs as independent contractors during the relevant period and learned of their common-law-employee status only after the IRS examination. They were paid through the accounts receivable department rather than the payroll department because of Microsoft\u2019s mistaken view as to their legal status. Accordingly, Microsoft cannot now contend that the fact that they were paid through the accounts receivable department demonstrates that the company intended to deny them the benefits received by all common-law employees regardless of their actual employment status. Indeed, Microsoft has pointed to no evidence suggesting that it ever denied eligibility to any employees, whom it understood<\/em> to be common-law employees, by paying them through the accounts receivable department or otherwise.<\/p>\n

            We therefore construe the ambiguity in the plan against Microsoft and hold that the plaintiffs are eligible to participate under the terms of the SPP.<\/p>\n

            [Next, regarding the ESPP] we hold that the plaintiffs\u2026are covered by the specific provisions of the ESPP. We apply the \u201cobjective manifestation theory of contracts,\u201d which requires us to \u201cimpute an intention corresponding to the reasonable meaning of a person\u2019s words and acts.\u201d [Citation] Through its incorporation of the tax code provision into the plan, Microsoft manifested an objective intent to make all common-law employees, and hence the plaintiffs, eligible for participation. The ESPP specifically provides:<\/p>\n

            It is the intention of the Company to have the Plan qualify as an \u201cemployee stock purchase plan\u201d under Section 423 of the Internal Revenue Code of 1954. The provisions of the Plan shall, accordingly, be construed so as to extend and limit participation in a manner consistent with the requirements of that Section of the Code.<\/em> (emphasis added)<\/p><\/blockquote>\n

            [T]he ESPP, when construed in a manner consistent with the requirements of \u00a7 423, extends participation to all common-law employees not covered by one of the express exceptions set forth in the plan. Accordingly, we find that the ESPP, through its incorporation of \u00a7 423, expressly extends eligibility for participation to the plaintiff class and affords them the same options to acquire stock in the corporation as all other employees.<\/p>\n

            Microsoft next contends that the [employment agreements] signed by the plaintiffs render them ineligible to participate in the ESPP. First, the label used in the instruments signed by the plaintiffs does not control their employment status. Second, the employment instruments, if construed to exclude the plaintiffs from receiving ESPP benefits, would conflict with the plan\u2019s express incorporation of \u00a7 423. Although Microsoft may have generally intended to exclude individuals who were in fact independent contractors, it could not, consistent with its express intention to extend participation in the ESPP to all common-law employees, have excluded the plaintiffs. Indeed, such an exclusion would defeat the purpose of including \u00a7 423 in the plan, because the exclusion of common-law employees not otherwise accepted would result in the loss of the plan\u2019s tax qualification.<\/p>\n

            Finally, Microsoft maintains that the plaintiffs are not entitled to ESPP benefits because the terms of the plan were never communicated to them and they were therefore unaware of its provisions when they performed their employment services.\u2026In any event, to the extent that knowledge of an offer of benefits is a prerequisite, it is probably sufficient that Microsoft publicly promulgated the plan. In [Citation], the plaintiff was unaware of the company\u2019s severance plan until shortly before his termination. The Oklahoma Supreme Court concluded nonetheless that publication of the plan was \u201cthe equivalent of constructive knowledge on the part of all<\/em> employees not specifically excluded.\u201d<\/p>\n

            We are not required to rely, however, on the [this] analysis or even on Microsoft\u2019s own unwitting concession. There is a compelling reason, implicit in some of the preceding discussion, that requires us to reject the company\u2019s theory that the plaintiffs\u2019 entitlement to ESPP benefits is defeated by their previous lack of knowledge regarding their rights. It is \u201cwell established\u201d that an optionor may not rely on an optionee\u2019s failure to exercise an option when he has committed any act or failed to perform any duty \u201ccalculated to cause the optionee to delay in exercising the right.\u201d [Citation] \u201c[T]he optionor may not make statements or representations calculated to cause delay, [or] fail to furnish [necessary] information.\u2026\u201d Similarly, \u201c[I]t is a principle of fundamental justice that if a promisor is himself the cause of the failure of performance, either of an obligation due him or of a condition upon which his own liability depends, he cannot take advantage of the failure.\u201d [Citation]\u2026<\/p>\n

            Applying these principles, we agree with the magistrate judge, who concluded that Microsoft, which created a benefit to which the plaintiffs were entitled, could not defend itself by arguing that the plaintiffs were unaware of the benefit, when its own false representations precluded them from gaining that knowledge. Because Microsoft misrepresented both the plaintiffs\u2019 actual employment status and their eligibility to participate in the ESPP, it is responsible for their failure to know that they were covered by the terms of the offer. It may not now take advantage of that failure to defeat the plaintiffs\u2019 rights to ESPP benefits. Thus, we reject Microsoft\u2019s final argument.<\/p>\n

            Conclusion<\/h3>\n

            For the reasons stated, the district court\u2019s grant of summary judgment in favor of Microsoft and denial of summary judgment in favor of the plaintiffs is REVERSED and the case REMANDED for the determination of any questions of individual eligibility for benefits that may remain following issuance of this opinion and for calculation of the damages or benefits due the various class members.<\/p>\n

            \n

            Case Questions<\/h3>\n
            \n
              \n
            1. In a 1993 Wall Street Journal<\/em> article, James Bovard asserted that the IRS \u201cis carrying out a sweeping campaign to slash the number of Americans permitted to be self-employed\u2014and to punish the companies that contract with them\u2026IRS officials indicate that more than half the nation\u2019s self-employed should no longer be able to work for themselves.\u201d Why did Microsoft want these employees to \u201cbe able to work for themselves\u201d?<\/li>\n
            2. Why did the employees accept employment as independent contractors?<\/li>\n
            3. It seems unlikely that the purpose of the IRS\u2019s campaign was really to keep people from working for themselves, despite Mr. Bovard\u2019s assumption. What was the purpose of the campaign?<\/li>\n
            4. Why did the IRS and the court determine that these \u201cindependent contractors\u201d were in fact employees?<\/li>\n<\/ol>\n<\/section>\n<\/div>\n<\/div>\n
              \n

              Breach of Fiduciary Duty<\/h2>\n

              Bacon v. Volvo Service Center, Inc.<\/p>\n

              597 S.E.2d 440 (Ga. App. 2004)<\/p>\n

              Smith, J.<\/p>\n

              [This appeal is] taken in an action that arose when two former employees left an existing business and began a new, competing business.\u2026Bacon and Johnson, two former employees of Volvo Service Center, Inc. (VSC), and the new company they formed, South Gwinnett Volvo Service, Ltd. (SGVS), appeal from the trial court\u2019s denial of their motion for judgment notwithstanding the jury\u2019s verdict in favor of VSC.\u2026<\/p>\n

              VSC filed suit against appellants, alleging a number of claims arising from the use by Bacon, who had been a service technician at VSC, of VSC\u2019s customer list, and his soliciting Johnson, a service writer, and another VSC employee to join SGVS. SGVS moved for a directed verdict on certain claims at the close of plaintiff\u2019s evidence and at the close of the case, which motions were denied. The jury was asked to respond to specific interrogatories, and it found for VSC and against all three appellants on VSC\u2019s claim for misappropriation of trade secrets. The jury also found for plaintiff against Bacon for breach of fiduciary duty,\u2026tortious interference with business relations, employee piracy, and conversion of corporate assets. The jury awarded VSC attorney fees, costs, and exemplary damages stemming from the claim for misappropriation of trade secrets. Judgment was entered on the jury\u2019s verdict, and appellants\u2019 motion for j.n.o.v. was denied. This appeal ensued. We find that VSC did not meet its burden of proof as to the claims for misappropriation of trade secrets, breach of fiduciary duty, or employee piracy, and the trial court should have granted appellants\u2019 motion for j.n.o.v.<\/p>\n

              Construed to support the jury\u2019s verdict, the evidence of record shows that Bacon was a technician at VSC when he decided to leave and open a competing business. Before doing so, he printed a list of VSC\u2019s customers from one of VSC\u2019s two computers. Computer access was not password restricted, was easy to use, and was used by many employees from time to time.<\/p>\n

              About a year after he left VSC, Bacon gave Johnson and another VSC employee an offer of employment at his new Volvo repair shop, which was about to open. Bacon and Johnson advertised extensively, and the customer list was used to send flyers to some VSC customers who lived close to the new shop\u2019s location. These activities became the basis for VSC\u2019s action against Bacon, Johnson, and their new shop, SGVS.\u2026<\/p>\n

              1. The Georgia Trade Secrets Act of 1990, [Citation], defines a \u201ctrade secret\u201d as<\/p>\n

              information, without regard to form, including, but not limited to,\u2026a list of actual or potential customers or suppliers which is not commonly known by or available to the public and which information:<\/p>\n

              (A) Derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and<\/p>\n

              (B) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.<\/p><\/blockquote>\n

              If an employer does not prove both prongs of this test, it is not entitled to protection under the Act. Our Supreme Court held in [Citation, 1991] for instance, that information was not a trade secret within the meaning of the Act because no evidence showed that the employer \u201cmade reasonable efforts under the circumstances\u2026to maintain the confidentiality of the information it sought to protect.\u201d<\/p>\n

              While a client list may be subject to confidential treatment under the Georgia Trade Secrets Act, the information itself is not inherently confidential. Customers are not trade secrets. Confidentiality is afforded only where the customer list is not generally known or ascertainable from other sources and was the subject of reasonable efforts to maintain its secrecy.\u2026<\/p>\n

              Here, VSC took no<\/em> precautions to maintain the confidentiality of its customer list. The information was on both computers, and it was not password-protected. Moreover, the same information was available to the technicians through the repair orders, which they were permitted to retain indefinitely while Bacon was employed there. Employees were not informed that the information was confidential. Neither Bacon nor Johnson was required to sign a confidentiality agreement as part of his employment.<\/p>\n

              Because no evidence was presented from which the jury could have concluded that VSC took any steps, much less reasonable ones, to protect the confidentiality of its customer list, a material requirement for trade secret status was not satisfied. The trial court should have granted appellants\u2019 motion for j.n.o.v.<\/p>\n

              2. To prove tortious interference with business relations, \u201ca plaintiff must show defendant: (1) acted improperly and without privilege, (2) acted purposely and with malice with the intent to injure, (3) induced a third party or parties not to enter into or continue a business relationship with the plaintiff, and (4) caused plaintiff financial injury.\u201d [Citation] But \u201c[f]air competition is always legal.\u201d [Citations] Unless an employee has executed a valid non-compete or non-solicit covenant, he is not barred from soliciting customers of his former employer on behalf of a new employer. [Citation]<\/p>\n

              No evidence was presented that Bacon acted \u201cimproperly,\u201d that any of VSC\u2019s former customers switched to SGVS because of any improper act by Bacon, or that these customers would have continued to patronize VSC but for Bacon\u2019s solicitations. Therefore, it was impossible for a jury to calculate VSC\u2019s financial damage, if any existed.<\/p>\n

              3. With regard to VSC\u2019s claim for breach of fiduciary duty, \u201c[a]n employee breaches no fiduciary duty to the employer simply by making plans to enter a competing business while he is still employed. Even before the termination of his agency, he is entitled to make arrangements to compete and upon termination of employment immediately compete.\u201d [Citation] He cannot solicit customers for a rival business or do other, similar acts in direct competition with his employer\u2019s business before his employment ends. But here, no evidence was presented to rebut the evidence given by Bacon and Johnson that they engaged in no such practices before their employment with VSC ended. Even assuming, therefore, that a fiduciary relationship existed, no evidence was presented showing that it was breached.<\/p>\n

              4. The same is true for VSC\u2019s claim for employee piracy. The evidence simply does not show that any employees of VSC were solicited for SGVS before Bacon left VSC\u2019s employ.\u2026<\/p>\n

              Judgment reversed.<\/p>\n

              \n

              Case Questions<\/h3>\n
              \n
                \n
              1. Why was it determined that the defendants were not liable for any breach of trade secrecy?<\/li>\n
              2. What would have been necessary to show tortious interference with business relations?<\/li>\n
              3. The evidence was lacking that there was any breach of fiduciary duty. What would have been necessary to show that?<\/li>\n
              4. What is \u201cemployee piracy\u201d? Why was it not proven?<\/li>\n<\/ol>\n<\/section>\n<\/div>\n

                \u00a0Workers\u2019 Compensation: What \u201cInjuries\u201d Are Compensable?<\/h2>\n<\/div>\n
                \n

                Wolfe v. Sibley, Lindsay & Curr Co.<\/p>\n

                330 N.E.2d 603 (N.Y. 1975)<\/p>\n

                Wachtler, J.<\/p>\n

                This appeal involves a claim for workmen\u2019s compensation benefits for the period during which the claimant was incapacitated by severe depression caused by the discovery of her immediate supervisor\u2019s body after he had committed suicide.<\/p>\n

                The facts as adduced at a hearing before the Workmen\u2019s Compensation Board are uncontroverted. The claimant, Mrs. Diana Wolfe, began her employment with the respondent department store, Sibley, Lindsay & Curr Co. in February, 1968. After working for some time as an investigator in the security department of the store she became secretary to Mr. John Gorman, the security director. It appears from the record that as head of security, Mr. Gorman was subjected to intense pressure, especially during the Christmas holidays. Mrs. Wolfe testified that throughout the several years she worked at Sibley\u2019s Mr. Gorman reacted to this holiday pressure by becoming extremely agitated and nervous. She noted, however, that this anxiety usually disappeared when the holiday season was over. Unfortunately, Mr. Gorman\u2019s nervous condition failed to abate after the 1970 holidays.\u2026<\/p>\n

                Despite the fact that he followed Mrs. Wolfe\u2019s advice to see a doctor, Mr. Gorman\u2019s mental condition continued to deteriorate. On one occasion he left work at her suggestion because he appeared to be so nervous. This condition persisted until the morning of June 9, 1971 when according to the claimant, Mr. Gorman looked much better and even smiled and \u2018tousled her hair\u2019 when she so remarked.<\/p>\n

                A short time later Mr. Gorman called her on the intercom and asked her to call the police to room 615. Mrs. Wolfe complied with this request and then tried unsuccessfully to reach Mr. Gorman on the intercom. She entered his office to find him lying in a pool of blood caused by a self-inflicted gunshot wound in the head. Mrs. Wolfe became extremely upset and was unable to continue working that day.<\/p>\n

                She returned to work for one week only to lock herself in her office to avoid the questions of her fellow workers. Her private physician perceiving that she was beset by feelings of guilt referred her to a psychiatrist and recommended that she leave work, which she did. While at home she ruminated about her guilt in failing to prevent the suicide and remained in bed for long periods of time staring at the ceiling. The result was that she became unresponsive to her husband and suffered a weight loss of 20 pounds. Her psychiatrist, Dr. Grinols diagnosed her condition as an acute depressive reaction.<\/p>\n

                After attempting to treat her in his office Dr. Grinols realized that the severity of her depression mandated hospitalization. Accordingly, the claimant was admitted to the hospital on July 9, 1971 where she remained for two months during which time she received psychotherapy and medication. After she was discharged, Dr. Grinols concluded that there had been no substantial remission in her depression and ruminative guilt and so had her readmitted for electroshock treatment. These treatments lasted for three weeks and were instrumental in her recovery. She was again discharged and, in mid-January, 1972, resumed her employment with Sibley, Lindsay & Curr.<\/p>\n

                Mrs. Wolfe\u2019s claim for workmen\u2019s compensation was granted by the referee and affirmed by the Workmen\u2019s Compensation Board. On appeal the Appellate Division reversed citing its opinions in [Citations], [concluding]\u2026that mental injury precipitated solely by psychic trauma is not compensable as a matter of law. We do not agree with this conclusion.<\/p>\n

                Workmen\u2019s compensation, as distinguished from tort liability which is essentially based on fault, is designed to shift the risk of loss of earning capacity caused by industrial accidents from the worker to industry and ultimately the consumer. In light of its beneficial and remedial character the Workmen\u2019s Compensation Law should be construed liberally in favor of the employee [Citation].<\/p>\n

                Liability under the act is predicated on accidental injury arising out of and in the course of employment.\u2026Applying these concepts to the case at bar we note that there is no issue raised concerning the causal relationship between the occurrence and the injury. The only testimony on this matter was given by Dr. Grinols who stated unequivocally that the discovery of her superior\u2019s body was the competent producing cause of her condition. Nor is there any question as to the absence of physical impact. Accordingly, the focus of our inquiry is whether or not there has been an accidental injury within the meaning of the Workmen\u2019s Compensation Law.<\/p>\n

                Since there is no statutory definition of this term we turn to the relevant decisions. These may be divided into three categories: (1) psychic trauma which produces physical injury, (2) physical impact which produces psychological injury, and (3) psychic trauma which produces psychological injury. As to the first class our court has consistently recognized the principle that an injury caused by emotional stress or shock may be accidental within the purview of the compensation law. [Citation] Cases falling into the second category have uniformly sustained awards to those incurring nervous or psychological disorders as a result of physical impact [Citation]. As to those cases in the third category the decisions are not as clear.\u2026<\/p>\n

                We hold today that psychological or nervous injury precipitated by psychic trauma is compensable to the same extent as physical injury. This determination is based on two considerations. First, as noted in the psychiatric testimony there is nothing in the nature of a stress or shock situation which ordains physical as opposed to psychological injury. The determinative factor is the particular vulnerability of an individual by virtue of his physical makeup. In a given situation one person may be susceptible to a heart attack while another may suffer a depressive reaction. In either case the result is the same\u2014the individual is incapable of functioning properly because of an accident and should be compensated under the Workmen\u2019s Compensation Law.<\/p>\n

                Secondly, having recognized the reliability of identifying psychic trauma as a causative factor of injury in some cases and the reliability by identifying psychological injury as a resultant factor in other cases, we see no reason for limiting recovery in the latter instance to cases involving physical impact. There is nothing talismanic about physical impact.<\/p>\n

                We would note in passing that this analysis reflects the view of the majority of jurisdictions in this country and England. [Citations]\u2026<\/p>\n

                Accordingly, the order appealed from should be reversed and the award to the claimant reinstated, with costs.<\/p>\n

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                Case Questions<\/h3>\n
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                1. Why did the appeals court deny workers\u2019 compensation benefits for Wolfe?<\/li>\n
                2. On what reasoning did the New York high court reverse?<\/li>\n
                3. There was a dissent in this case (not included here). Judge Breitel noted that the evidence was that Mrs. Wolfe had a psychological condition such that her trauma \u201ccould never have occurred unless she, to begin with, was extraordinarily vulnerable to severe shock at or away from her place of employment or one produced by accident or injury to those close to her in employment or in her private life.\u201d The judge worried that \u201cone can easily call up a myriad of commonplace occupational pursuits where employees are often exposed to the misfortunes of others which may in the mentally unstable evoke precisely the symptoms which this claimant suffered.\u201d He concluded, \u201cIn an era marked by examples of overburdening of socially desirable programs with resultant curtailment or destruction of such programs, a realistic assessment of impact of doctrine is imperative. An overburdening of the compensation system by injudicious and open-ended expansion of compensation benefits, especially for costly, prolonged, and often only ameliorative psychiatric care, cannot but threaten its soundness or that of the enterprises upon which it depends.\u201d What is the concern here?<\/li>\n<\/ol>\n<\/section>\n<\/div>\n
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