Deductions from wages for cash or merchandise shortages are legal even if they reduce
an employee’s wages below the minimum wage.
The business judgment rule is applied by the courts as a presumption that must be
overcome by the person challenging a director’s actions.
Ames, an agent for Baker Antiques, had the authority to purchase early 20th-century
American furniture costing a maximum of $1,500 per piece. Ames bought a
19th-century French desk for $3,000 from Carter. Baker was furious when she saw the
desk, and she fired Ames. Nevertheless, she put the desk on display in the shop with a
$5,000 price tag. When the best offer she got for the desk was $2,500, Baker returned
the desk to Carter. Baker told Carter that Ames had exceeded his authority in
purchasing the desk, and she demanded that Carter refund the $3,000 that Ames had
paid for the desk. Will Carter have to do so?