Online Shopping and Employment: Legal Perspective

Legal Issues in E-Commerce

Introduction

Since its introduction, the online shopping and e-commerce platform has experienced an exponential growth. Business-to-consumer has contributed significantly to the development of this form of trade. However, like in all other form of emerging technologies, there are several concerns that make it hard for online customers to exploit the new mode of shopping experience. The issues relate to, among others, concerns over privacy, security, order fulfillment, merchant integrity, fraud, and identity theft.1 The number of consumers who wish to engage in online shopping is increasing as internet connectivity expands.

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In this section, the author will analyze the various issues associated with online shopping and e-commerce in general in contemporary society. The facts will be reviewed from the perspective of business law. Some of the elements that will be reviewed include the advantages and disadvantages of online shopping, contract considerations, and consumer rights.

Online Shopping and E-Commerce

Online shopping is a type of e-commerce that enables a consumer to buy goods directly from the vendor through the internet. To this end, the consumer searches through the internet for the retailers directly or through alternative vendors and shopping search engines.2 Today, individuals can access a wide variety of items and services online from the comfort of their homes. They can do this using a computer, a smartphone, or any gadget that has internet connectivity.

There are many types of online businesses available to consumers and retailers today. One of them is the Big-Brother-Twit-Snap-Insta-Book-Face (BBTSIBF) business platform. It is a new internet-based business that has elicited interest from many consumers.3 The service combines image sharing, instant messaging, social media communications, online banking, online games, e-mail, grocery ordering and delivery, and health advice. The online service appears impressive and many consumers have responded positively by uploading a lot of information about them. Such information includes financial details, health data, and their shopping orientation.4 In spite of the promises made by the free online service, the inherent risks associated with the use of the internet still apply to BBTSIBF.

Advantages and Disadvantages of Online Shopping

Advantages

Online shopping is a convenient way of conducting business. The online stores are accessible to consumers and retailers on a 24-hours basis. Most consumers, especially in the Western world, have internet access either at home or at work. They can also access reliable internet via their smartphones. The access is also available at such establishments as internet cafes, schools, and community centers. In comparison to e-commerce, the conventional mode of shopping involves a wide range of unavoidable costs. They include expenses incurred when commuting to the shopping center, gas, parking, and bus fare. In addition, the conventional shopping must be undertaken during business hours.5

Online stores offer a wide range of information regarding the products and services on offer. Such data includes prices and photos of the products, as well as background information. The data helps the consumer to make an informed decision.6 Another advantage of online shopping is that the retailers offer generous discounts to the consumers. In addition, they provide delivery services to the customer’s physical location.

Disadvantages of online shopping

Privacy and protection of personal information is a major concern to many online customers. Identity theft could jeopardize the integrity of the consumer’s personal information, especially financial and credit card numbers, as well as passwords. Such an eventuality could lead to fraud.7 Most online merchants assure their customers that they will not disclose their personal details. However, in spite of this assurance, a number of online merchants collect and archive the personal information, which they later use to contact the customer in the future.8 The problem is that such data may be accessed by third parties, who may use it for fraud, spam, or other malicious activities. The potential users of BBTSIBF should be aware of the fact that there are various risks associated with the disclosure of their personal data during online shopping.

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Contract Consideration in Online Transactions

Under tort law, the contracting parties must carry out a ‘consideration’ if the contract for the agreement to be formal and legally binding. A consideration in law demands that each party must accrue benefits from the contract in question.9 Online transaction is a form of commercial contract between the buyer and the vendor. The issue of consideration may not be of much concern to the parties involved. The buyer gets the goods ordered and the seller gets the payment. However, there are cases and occasions where consideration may be of significance to the transaction. An example is when the seller and the buyer are taking into consideration the issue of non-disclosure and other forms of guarantees. In most cases, such considerations are one-sided.10

Just like in traditional agreements, online contracts must meet a number of criteria for them to become legally binding and enforceable. With regards to consumer interactions, an offer entails the intent to purchase a commodity or service.11 Most online contracts are entered into by the click of a button. Clicking the button is an indication of an acceptance. It is viewed as the expression of willingness to meet the conditions of the agreement entered into with the other party. A number of cases can be used to demonstrate this point. An example is the decision made by the court in I. Lan Systems, Inc. v Netscout Service Level Corporation.12 The court found that a person is bound by the terms of the contract when they click on the ‘Agree’ button.13 A similar finding was made in McKendall Lumber Co. v Kalian.14 The court observed that a customer cannot walk out of a contract after signing it.15 Consequently, when an individual signs an agreement, it is an indication of their assent.

In law, the agreement entered into must benefit both parties. For instance, most commercial transactions entail the exchange of goods and services for money. If a customer has paid for some goods or services and the retailer does not deliver as agreed, the merchant is regarded as having failed to uphold the inherent consideration of the contract. In other words, their actions amount to a breach of contract.16 Either of the two parties can terminate an agreement if one of them breaches their obligations. In such a scenario, the aggrieved party can seek legal redress for compensation.

Consumer’s Rights

In any purchase contract, a consumer makes several assumptions with regards to the product they intend to buy. Such presumptions touch on the quality of the merchandize, unless the seller has disclosed some faults.17 The online shopper should be aware of the fact that regardless of their rights, the responsibility to make a purchase lies with them. The buyer is expected to have familiarized themselves with the product to ensure that it is of merchantable quality. In such a case, the seller is under no obligation to make amends for the customer’s poor choice.

There are some statutes that offer protection to consumers. One of them is the Trade Practice Act 1974.18 It is a federal legislation that was designed to ensure that vendors meet the set minimum standards in a given industry.19 The act also protects customers from harmful products. In addition, the consumer is protected from such malpractices as misrepresentation and market manipulation. The legislation guarantees that buyers have access to choices through healthy competition.

Legal Issues in Employment

Fiduciary Obligations

According to the agency law, employees owe fiduciary duty to their employer. The legislation regards all employees as agents of the employer. Consequently, as agents, they have fiduciary obligation to be loyal with regards to all matters related to the agency relationship. The relationship is highlighted under the Restatement (Third) of Unfair Competition legislation.20 In the context of employment, the duty of loyalty includes various assurances. For example, the worker should not compete with the employer. In addition, they should not solicit for the customers associated with their employer, their clients, and other employees before and after leaving the organization. The duty also covers the sharing of trade secrets and confidential information with a new employer. In addition, loyalty covers the disclosure of conflicts and adverse information with the new employer. The law expects the employee to act in the best interests of the organization. Consequently, entities protect themselves against the sudden departure of employees to competition by creating an enforceable agreement that clearly states the non-competing requirement.21 The agreement may be entered into at the commencement of the employment or during exit.

There are situations where an employee leaves to set up an enterprise that provides direct competition to their former employer. Such scenarios have led to litigations.22 The issue is whether or not the worker has breached the fiduciary duty by planning to create a competing business or accepting employment with a rival company. There are conflicts of interest at several levels. However, many courts have opined that an employee is allowed to prepare to compete with the employer.23 The courts are guided by the rationale of maintaining a balance between the interests of the employee, fair trade, and free competition. That spirit was maintained in Maryland Metals, Inc. v Metzner.24 The court maintained a similar stance in White Cap Industries, Inc. v Ruppert.25 In both instances, the court maintained that the law permits employees to prepare for competition by giving them freedom to change jobs. The limitations of the rights to prepare are clearly stated. For example, the employee cannot solicit for their employer’s clients when still in employment

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The case of an employee who is leaving employment for a position in a competing organization should be easy to state. Employees have a duty of loyalty towards their employers when they are in employment.26 In the absence of an enforceable agreement, especially one that describes the non-competition activities, the employee may be assumed to be free to compete with the employer. They can do this by using their skills, knowledge, and experience. However, that simple observation gets complicated when viewed against the backdrop of reality. An evaluation of the knowledge and skills may highlight the existence of information that may have been disclosed to the employee in the course of their employment.27 The situation reflects a conundrum of complicated expectations.

Trade Secrets

Trade secrets are general in nature. They include such secrets as those behind the formula of famous products like Coca-Cola. Many people assume that the law can only protect such significant information. However, the reality is that trade secrets can encompass the knowledge an employee has gained regarding the employer’s business operations.28 Should such an employee start working for a competing organization, they may be sued. The litigations are especially common in instances where the worker performs tasks and duties that are similar to those they were carrying out in their previous place of work.29 In such a case, the court’s argument is based on the principle of inevitability. It is assumed that the employee is likely to use the trade secrets of their former employer.

A problem arises when differentiating between a trade secret and the employee’s general knowledge, skills, as well as experience. The information is not like other types of intellectual property, such as copyrights, patents, and trademarks. On the contrary, it is objectively defined and recognized in law through specific statutes. Trade secrets are dependent on the circumstances they are obtained through and the arising duty.30 In most cases, employers have a clear confidentiality contract. The contract informs the employee that certain information, which may come their way in the course of their employment, is considered confidential. When the employee signs the agreement, they accept the duty and agree not to use such confidential information with a third party, either in their capacity as an employee or after they have left employment.

However, the courts acknowledge that a confidentiality agreement cannot proclaim a trade secret on things that are generally known. Consequently, the court would be reluctant to restrain competition on the allegation of unproven trade secrets.31 A case in point is AMP Incorporated v. Molex Incorporated.32 It was found that if an employer does not explicitly obtain an agreement prohibiting an employee from engaging in competition, the court cannot elevate ordinary experience into trade secrets.33

It is important for an employee who is contemplating leaving employment to continue being loyal to the organization as per their duty to the employer. They should continue performing to a level that is similar to a situation where plans for leaving were unfeasible.34 Should a business opportunity arise, they should pursue it and bring it to the attention of the employer.

Resignation and Fiduciary Duty

Resigning from employment does not absolve the employee from the fiduciary duty. Some duties may survive beyond the termination of employment. For example, competition with a former employer could constitute a breach of the agreement. The situation may occur if the competition is based on information gathered during the tenure of employment. Such activities are actionable in court.35 Employees have a duty of loyalty during and after employment. Any adverse action, whether during employment or after leaving, may be deemed as a breach of fiduciary duty.

Bibliography

Statute

Restatement (Third) of Unfair Competition, 1995, § 42 cmt. D.

Cases

AMP Incorporated v Molex Incorporated, 1987 823 F. 2d 1199, 1206 [7th Cir. 1987].

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I. Lan Systems, Inc. v Netscout Service Level Corporation, 2002 83 F. Supp. 2d 328, [D. Mass. 2002].

Maryland Metals, Inc. v Metzner, 1978 382 A.2d 564 [Md. 1978].

McKendall Lumber Co. v Kalian, 1981 425 A.2~d 515, [RI. 1981].

White Cap Industries, Inc. v Ruppert, 2003 119 Nev. 126, 67 P.3d 318, [Nev. 2003].

Books

Bonnie Bogue et al, Advising California Employers and Employees: 2016 Update (Arlington: CEB Publisher, 2016).

David Walsh, Employment Law for Human Resource Practice, 5th ed (Boston: Cengage Learning, 2015).

Ewelina Lacka, Hing Chan & Nick Yip, E-commerce Platform Acceptance: Suppliers, Retailers, and Consumers (New York: Springer, 2014).

M Mohanraj & M Sakthivel, Customer Perception about Online Shopping, Tamilnadu (New Delhi: EduPedia Publications Pvt. Ltd., 2016).

Masaaki Kurosu, Human-Computer Interaction: Users and Contexts of Use (New York: Springer, 2013).

Morton Daller, Business Torts: A Fifty-State Guide (New York: Wolters Kluwer, 2016).

Footnotes

  1. Ewelina Lacka, Hing Chan & Nick Yip, E-commerce Platform Acceptance: Suppliers, Retailers, and Consumers (New York: Springer, 2014).
  2. David Walsh, Employment Law for Human Resource Practice, 5th ed (Boston: Cengage Learning, 2015).
  3. Bonnie Bogue et al, Advising California Employers and Employees: 2016 Update (Arlington: CEB Publisher, 2016).
  4. Ibid.
  5. Ewelina Lacka, Hing Chan & Nick Yip, supra.
  6. M Mohanraj & M Sakthivel, Customer Perception about Online Shopping, Tamilnadu (New Delhi: EduPedia Publications Pvt. Ltd., 2016).
  7. Bonnie Bogue, supra.
  8. Masaaki Kurosu, Human-Computer Interaction: Users and Contexts of Use (New York: Springer, 2013).
  9. Morton Daller, Business Torts: A Fifty-State Guide (New York: Wolters Kluwer, 2016).
  10. Masaaki Kurosu, supra.
  11. David Walsh, supra.
  12. I. Lan Systems, Inc. v Netscout Service Level Corporation, 2002 83 F. Supp. 2d 328, [D. Mass. 2002].
  13. Ibid.
  14. McKendall Lumber Co. v Kalian, 1981 425 A.2~d 515, [RI. 1981].
  15. Ibid.
  16. Masaaki Kurosu, supra.
  17. Morton Daller, supra.
  18. Ibid.
  19. Masaaki Kurosu, supra.
  20. Restatement (Third) of Unfair Competition, 1995, § 42 cmt. D.
  21. Bonnie Bogue, supra.
  22. Ewelina Lacka, Hing Chan & Nick Yip, supra.
  23. Morton Daller, supra.
  24. Maryland Metals, Inc. v Metzner, 1978 382 A.2d 564 [Md. 1978].
  25. White Cap Industries, Inc. v Ruppert, 2003 119 Nev. 126, 67 P.3d 318, [Nev. 2003].
  26. Morton Daller, supra.
  27. M Mohanraj & M Sakthivel, supra.
  28. David Walsh, supra.
  29. Morton Daller, supra.
  30. David Walsh, supra.
  31. Ibid
  32. AMP Incorporated v Molex Incorporated, 1987 823 F. 2d 1199, 1206 [7th Cir. 1987].
  33. Ibid.
  34. Morton Daller, supra.
  35. Ibid.
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