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NETA PowerPoint® Slides

to accompany

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Chapter 1

Knowledge of
Law as a
Business Asset

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Objectives
After studying this chapter, you should have an understanding of
• the role of law in guiding conduct
• the importance of legal knowledge in the business environment
• the challenges posed by business ethics and their relationship to legal
requirements

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Law in the Business Environment
• Law impacts every aspect of society, including the business
environment.
• Knowledge of the law helps entrepreneurs maximize protection
and avoid pitfalls.
• The law affects most business decisions.
• Lack of knowledge of the law may mean lost opportunities

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Law in the Business Environment
• Business Law
• A set of established rules governing commercial relationships, including the
enforcement of rights.
• Knowledge of the law is a business asset, because it
• defines general rules of commerce.
• protects business ideas and more tangible forms of property.
• provides mechanisms that permit businesspeople to select their desired
degree of participation and exposure to risk in business ventures.
• seeks to ensure that losses are borne by those who are responsible for them.
• facilitates planning by ensuring compliance with commitments.

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How Is Law Useful in the Business
Environment?
• Facilitates business planning
• Provides mechanisms that permit businesspeople to manage their
participation in business activities and exposure to risk in business
ventures
• Provides mechanisms to ensure losses are borne by those who are
responsible for them

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BOX: INTERNATIONAL PERSPECTIVE

Canadian Craft Brewery Changes Name


in Light of Possible Trademark Infringement
• A New Brunswick brewery’s name,
Gray Stone, infringed upon a U.S.
company’s trademark.
• Trademark: A word, symbol, design,
or any combination of these used to
distinguish a person’s products or
services from those of others.

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BOX: INTERNATIONAL PERSPECTIVE

Canadian Craft Brewery Changes Name


in Light of Possible Trademark Infringement
• In this example, the issue was dealt with amicably, and the
New Brunswick company changed all of its materials to the
name Graystone.
• The New Brunswick brewery learned that a proactive trademark
search would have avoided the costs of changing its logos, etc.

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Protecting Persons and Their Property
• Law – The set of rules and principles guiding conduct in society.
• The most familiar purpose of the law is to provide protection.
• Businesses need to protect their customers’ personal information.

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Protecting Persons and Their Property
• PIPEDA: Personal Information Protection and Electronic Documents Act
• Federal legislation, imposes national privacy standards on how businesses can
collect, use, disclose personal information
• Personal information: Information that is “uniquely and directly
connected to one person.”*
• Privacy Commissioner: Mandated to resolve complaints against
businesses’ treatment of personal information, independent from
government, accessible to all Canadians.

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BOX: BUSINESS AND LEGISLATION

Breaches of Privacy
• The Privacy Commissioner’s cases cover a wide range.
• Example 1: A gym disclosed how often a man worked out to the
man’s employer (the employer paid for the membership).
• The Privacy Commissioner agreed that the man had not consented for that
information to be shared.
• The Privacy Commissioner provided recommendations for the gym to
implement to avoid this.
• In a subsequent court case, the court would not award monetary damages to
the complainant, because shared information did not cause any injury or loss.

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BOX: BUSINESS AND LEGISLATION

Breaches of Privacy
• Example 2: A woman who gave
birth in Ontario was approached
by a company selling registered
education savings plans (RESP).

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BOX: BUSINESS AND LEGISLATION

Breaches of Privacy
• The RESP contained the woman’s name, contact information, and
dates of her hospital visits.
• Information had been acquired by a hospital staff member and sold to
the company.
• The Privacy Commissioner agreed there was a breach of privacy.
• The Privacy Commissioner provided recommendations to the RESP
company on procedures and privacy.
• Now, a class action lawsuit for $400 million has been filed against the
hospital, representing 8000 patients.

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Protecting Persons and their Property (cont’d)
• The law offers protection in two ways:
1. It sets rules to safeguard interests.
2. It sets penalties and other consequences for breach of those rules.

• Breach of contract: Failure to comply with a contractual promise.

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BOX: ETHICAL CONSIDERATIONS

Maple Lodge Farms’ Conviction


• Animals raised for human consumption are entitled to a reasonable
measure of protection, including proper food and shelter, and when
being transported.
• The Health of Animals Act provides legislation to protect animals.
• Maple Lodge Farms’ treatment of 25 450 chickens was found to be
inhumane and inadequate.
• The company was charged $80 000, and put on 3-year probation.

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BOX: ETHICAL CONSIDERATIONS

Maple Lodge Farms’ Conviction


• What are the reputational
costs to Maple Lodge Farms
for its recent convictions
and how can those be
managed?

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BOX: BUSINESS AND LEGISLATION

Regulating Recreational Drones


• Availability of drones is prompting governments to develop interim
rules that protect people’s privacy.
• Drones have been seen looking into condo windows.
• Drones have caused issues with aircraft in flight.
• Rules include:
• Limits to height
• Limits to proximity to vehicles, people, airports, aircraft, natural hazards
• Time of day, and weather (clouds)
• Clearly marking owner’s name, address, phone number

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Facilitating Interactions
• The law assists with many personal interactions:
• Marriage
• Adoption
• Disposal of property upon the owner’s death
• The law facilitates commercial activity by providing rules governing
the marketplace.
• Contract law: Rules that make agreements binding and, therefore, facilitate
planning and the enforcement of expectations.

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Providing Mechanisms for Dispute Resolution
• Disputes do not always need to be resolved in the legal system.
• In many cases, the business can find a way to resolve a dispute
without invoking costly legal fees.
• e.g., providing a severance package when firing an employee
• In other cases, legal steps are necessary.
• e.g., failure to comply with contract commitments

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Providing Mechanisms for Dispute Resolution
• To determine if the legal system is needed:
1. Are legal proceedings absolutely necessary, at least right now?
2. Is there a way to resolve the problem from a larger, relationship-preserving
perspective, rather than from a strictly legal viewpoint?
• Minimizing legal costs may be more important than proving a specific
principle.
• Mediation and arbitration are legal ways of avoiding litigation.

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Providing Mechanisms for Dispute Resolution
• Mediation: A process through which the parties to a dispute endeavour
to reach a resolution with the assistance of a neutral person.
• Arbitration: A process through which a neutral party makes a decision
(usually binding) that resolves a dispute.
• As a last-resort, litigation may be needed, to establish liability.
• Liability: Legal responsibility for the event or loss that has occurred.

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How and Why the Law Works
• The Canadian legal system determines liability in accordance with
certain principles and processes that are regarded as just.
• The process for determining liability and the rules or laws applied in
Canada aim to be impartial, fair, and free from bias.
• However, full and complete impartiality is impossible.

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How and Why the Law Works
• This man said that he had been
locked in a car trunk over a debt
owed to his attackers. He was
freed by firefighters. How is this
method of dispute resolution
inconsistent with the values
informing the Canadian
justice system?

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Knowledge of the Law as a Business Asset
• Owners and managers can protect their business by ensuring compliance
with legal requirements.
• Businesses can use contracts to plan for the future.
• Laws can protect people and property.
• Businesses can use laws to enforce legal rules against those who do
business and have interactions with the enterprise.
• Legal risk management plan: A comprehensive action plan for dealing
with the legal risks involved in operating a business.
• This should be done before the risks occur.

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Law and Business Ethics
• Simply complying with the law is not enough.
• Business ethics: Moral principles and values that seek to determine
right and wrong in the business world.
• Examples:
• How far should a company go in extolling the virtues of its product? When
does sales talk become deception?
• Should a business monitor employee emails and Internet use on company
computers?

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BOX: ETHICAL CONSIDERATIONS

Uber
• Uber avoids taxi industry regulations
that are in place to protect public
interest, address insurance, maintain
price levels, and others.
• Uber entered the Toronto market despite
being considered illegal, in the hopes
that it would force regulatory change:
“regulatory arbitrage.”
• The City of Toronto drew up Uber-friendly regulations,
and relaxed some of the traditional taxi regulations.

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