The following case study features problems and issues related to employment law. The case is fictional yet realistic to illustrate points in the lecture and text and to provide problems within legal cases to solve. This case and Case Study B will be used for a number of weeks.
Important Note: Your weekly class assignments will notify you when to work on this case.
- A small corporation, Discrimina, Inc. is a small parts machining shop owned by Hank Discrimina and his daughter, Eunice Discrimina. Discrimina, Inc. makes high quality agricultural parts for some of the agricultural implement manufacturers.
- Mr. Discrimina is thinking of retiring and has considered selling out for about $1.2 million. His machine shop has only 15 employees and is appraised at only $600,000.00 including the steel building, grounds, machines, parts, and going business value.
- Defense Plants, Inc. has just offered to acquire the entire company for $1 million, and Hank Discrimina is allowing them to check out his company to see why they want to pay so much for a small machine shop. The agreement at this point gives both parties full rights to back out and allows Defense Plants executives to check out the place.
- Defense Plants, Inc. has large government contracts and also does work for private individuals. They sell ammunition for military and sporting uses.
- Because of their large contracts with the government, Defense Plants, Inc. has a group of people whose sole job is to comply with government regulations. Defense Plants also has an excellent human resources department that has developed a policy for nearly everything likely to come up in the area of employment disputes. The company is non-union. In contrast, Discrimina, Inc. is the alter ego of one man and to a lesser extent, his daughter. The company does not comply with employment laws. Up until recently, Discrimina was regulated mostly by state law, but recent expansions have put them into federal jurisdiction in a number of areas.
- During the tour of his plant, Mr. Discrimina asks his visitors from Defense Plants what military purpose his small machine shop could possibly have. Dave from Defense Plants politely declines to answer the question.
- A uniformed Navy officer appears the next day and asks Mr. Discrimina to sign a secrecy agreement. Mr. Discrimina recognizes the officer’s voice from calls made from a small implement manufacturer in another state. He puts two and two together and concludes that the whole reason the government and the other machine company are cooperating on this whole deal is to obtain access to the one specific machined part that has a military use. He also realizes that only one specific employee is qualified to machine the specific part. In fact, the employee, Jim Arbor, his best machinist, was the one who invented the part. Jim had come to work for Discrimina because he had needed to stay in the area for domestic reasons. One more important detail is that Jim is dating Eunice Discrimina.
- Mr. Discrimina is now considering selling the part directly to the government instead of selling his business. But there are employment law problems to solve before he can qualify as a government contractor.
- One problem has to do with terminating employees. The Discrimina, Inc. handbook says, “If you are a good employee and keep up with your work, I won’t fire you. But, if I want to close the plant, I can immediately fire everyone. I can also change this manual any time I want.”
- During the past six months, without updating the manual, Mr. Discrimina has fired three employees, all without logging any problems into Discrimina’s employment records. When asked, Mr. Discrimina says the three employees were harassing Rita Land, his bookkeeper, and he does not tolerate that at his company.
- The men consider Rita part of management because she works mostly in the office annex. Rita considers herself an ordinary employee, even though she is frequently in on confidential business planning with Hank Discrimina and his daughter, Eunice, the Vice President.
- If the company becomes a government contractor, Discrimina would have to have a health plan and would have to raise wages. There is no health plan now, due to increased costs resulting from the illnesses of the oldest employee, Frank Oldburr.
Case Study A Problems
Problem 1. Employment contracts and wrongful discharge
Mr. Discrimina, through Eunice, requests that his employee Jim Arbor sign what he calls a confidentiality agreement. He offers to “consider profit sharing and salary increases” if Jim signs, but does not put profit sharing and wage increases in writing. Jim asks to read the paper before he signs and finds that it also contains a non-competition agreement not allowing Jim to do any machining, mechanical engineering or any work on industrial parts for a period of five years after leaving the company, anywhere in the world. Jim feels that he is being taken advantage of, but does not know what to do. He has been threatened with discharge if he doesn’t sign.
- Analyze Jim Arbor’s situation. Does he have an employment contract now? What is it? Should he ask for the salary increase to be in writing? Why or why not?
- Is it fair for Eunice to take advantage of the fact that Jim does not know why his invention and services have suddenly become more valuable? Explain. Is it fair for her to be the one to approach him, given their personal relationship? Explain.