Business Ethics

Business Ethics

Please review and answer the questions that follow in 500 words, or as thoroughly as possible. Already provided answers to the questions only need to elaborate to get it to 500 words all over.



Chao v. Hotel Oasis, Inc.

493 F.3d 26 (1st Cir. 2007)


FACTS: Hotel Oasis, Inc. operates a hotel and restaurant in southwestern Puerto Rico. Dr. Lionel Lugo-Rodríguez (Lugo) is the president of the corporation, runs the hotel, and manages its employees. Oasis’s records show that between October 3, 1990 and June 30, 1993, employees were paid less than minimum wage, were not paid for training time or meetings held during non-working hours, were paid in cash “off the books,” and were not paid correctly for overtime. Oasis also maintained two sets of payroll records for the same employees, covering the same time periods, one showing fewer hours at a higher rate, and the other showing more hours at a sub-minimum wage rate. Lugo maintains that the two sets of books were necessary, one for temporary employees and one for permanent employees.


On April 5, 1994, the Secretary of Labor (the “Secretary”) filed a complaint in the United States District Court for the District of Puerto Rico against Oasis and Lugo (“Defendants”), alleging violations of the minimum wage, overtime, and recordkeeping provisions of the Fair Labor Standards Act (“FLSA”). The Secretary also sought liquidated damages.


After years of litigation, On June 21, 2005, the district court ordered Oasis to pay $141,270.64 in back wages and an equal amount in liquidated damages to 282 current and former employees. The court also found Lugo personally liable for the back wages and penalties. Lugo and Oasis appealed.

ISSUE ON APPEAL: Was a finding of an FLAS violation correct? Can an officer be held liable for such violations?


DECISION: Yes. Oasis and Lugo are both liable. The violation was willful, as evidenced by the two sets of books. Also, Lugo was in a position of control. He was an owner and did much of the managing. Under those circumstances he would be personally liable. Under the FLSA, an “employer” is “any person acting directly or indirectly in the interest of an employer in relation to an employee.” The First Circuit has followed the Supreme Court’s lead in interpreting this definition pursuant to an “economic reality” analysis. Accordingly, there may be multiple “employers” who are simultaneously liable for compliance with the FLSA.


Answers to Case Questions


1. What shows willfulness of a violation? There were the two sets of books with misrepresentations about hours worked, always in favor of the company.

2. What are the standards for holding an officer liable for FLSA violations? The officer must have a controlling interest or be involved in the management of the work force and have some control over the schedule and hours or be aware of the pay policies and the books and records.

3. Explain what liquidated damages are and when they are available for recovery. Liquidated damages are damages equal to the amount of wages recovered that are recoverable when the Department of Labor is able to show that there has been a willful violation of the FLSA.





Ricci v. DeStefano

557 U.S. 557 (2009)


FACTS: The city of New Haven, Connecticut, used objective examinations to identify those firefighters best qualified for promotion to fill vacant lieutenant and captain positions. On the basis of the examinations’ results, no black candidates were eligible for immediate promotion. There was a rancorous public debate when the issue became public. The city threw out the results based on the statistical racial disparity to avoid potential liability in a lawsuit based on disparate impact against the black candidates. White and Hispanic firefighters who passed the exams, but were denied a chance for promotion by the city’s refusal to certify the test results, sued the city, alleging disparate treatment – that is, that discarding the test results discriminated against them based on their race in violation of Title VII.


DECISION BELOW: The federal district court found that there was discrimination against the white and Hispanic firefighters, and the City appealed. The appellate court reversed the district court’s decision.


ISSUE ON APPEAL: Can an employer toss the results of an exam when the results of the exam produce a disparate impact and there is a threat of litigation?


DECISION: No. Exam results can be tossed only if there is evidence that the exam had a disparate impact. The evidence to toss an exam cannot consist of the threat of litigation. There must be some basis in evidence for not using the exam results such as the test is not a valid one.


Answers to Case Questions


1. Explain what happened on the exam and why the city decided to toss the exam results. The data in the case indicate as follows: the examination results showed that white candidates had outperformed minority candidates. Seventy-seven candidates completed the lieutenant examination – forty-three whites, nineteen blacks, and fifteen Hispanics. Of those, thirty-four candidates passed – twenty-five whites, six blacks, and three Hispanics. Eight lieutenant positions were vacant at the time of the examination, which meant that the top ten candidates were eligible for an immediate promotion to lieutenant. All ten were white. Subsequent vacancies would have allowed at least three black candidates to be considered for promotion to lieutenant.

Forty-one candidates completed the captain examination – twenty-five whites, eight blacks, and eight Hispanics. Of those, twenty-two candidates passed – sixteen whites, three blacks, and three Hispanics. Seven captain positions were vacant at the time of the examination. Nine candidates were eligible for an immediate promotion to captain – seven whites and two Hispanics. The firefighters who would not get promotions were threatening to litigate because they said the test had disparate impact. Those who would be promoted were threatening to litigate because the test was being thrown out on the basis of race.

2. What does the court establish as the law applicable to “tossing” exam results? The tossing cannot be done because of threat of litigation. The city needed evidence that there was indeed something wrong with the exam. Because the exam had been tested, the city had no such evidence.

3. What is the court trying to balance in interpreting the law? The need for eliminating discrimination vs. not just assuming that different results are caused by racial disparity. If an employer could never toss exam results, we could not eliminate the vestiges of discrimination. However, if they are required to toss them upon receiving threats, then those who studied and relied on the exam as a screening method are harmed

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