Friday, May 22, 2020
A few stories caught my eye this week.
First, Paige Smith and Robert Iafolla bring us news that refusing to wear a mask at work can cost you your job. Companies that are re-opening are following CDC guidelines by requiring that returning workers wear masks.
The story suggests that there has been little resistance from workers; on the contrary, workers are more likely to complain that their employers are taking too few precautions against contagion rather than too many. There are apparently religious and medical exemptions (don't those usually require face coverings rather than prohibit them?), but workers cannot claim a free-speech right to refuse to wear a mask. So long as the requirement that employees wear masks is generally applicable and generally enforced, with appropriate accommodations where reasonable, it is likely to survive any legal challenge.
Two quick points: first, I am always struck by the lack of outrage at private actors who do things that spark outrage when the government does them, even though the private actors are motivated by profit and the government is motivated, at least in part, by concerns like public safety or national security. The supposed difference is that workers consent to their terms of employment, but when you combine the ubiquity of at-will employment, form employment contracts that eliminate recourse, and a 15% unemployment rate, it is hard to take seriously claims that workers give meaningful consent to terms of employment. Nancy Kim and I explored this topic in the context of data-mining in connection with consumer contracting in a pre-Covid world.
Second, I wonder if the Bloomberg article underestimates the power of the argument that refusing to wear a mask is symbolic political speech. When I go shopping these days, only about half of the people in the store wear masks. Their refusal to do so puts me and other shoppers at risk. It's possible that they just don't know where to get a mask (try Etsy!), but it is hard not to view their choice not to wear mask as a statement, and perhaps they view my mask as a mark of my self-subordination to the nanny-state as well.
What do you do if you need to have someone to do some work in your home, and they show up without a mask? Do you tell them to leave and come back with a mask? Do you hide in the bathroom until they finish and then disinfect all surfaces with which they might have come in contact? Do you leave a Yelp review and give them a low rating in the public health and safety category? Confronting them seems like borrowing trouble. They have access to the same information that you have. Telling adults that they've made a poor decision (or implying that they have) rarely goes over well.
Meanwhile, Jef Feeley and Joshua Fineman report on another acquisition now on hold because of the pandemic. In Forescout Technologies Inc. v. Ferrari Group Holdings LP, 2020-0385, Delaware Chancery Court (Wilmington), Forescout, a cybersecurity company, is claiming that private equity group, Advent International, ought not to be permitted to back out of its $1.9 billion deal to acquire Forescout. Forescout claims that Advent assumed the risks associated with any possible impact that the pandemic might have on the deal. According to the report, this is one of at least nine deals that resulted in Covid-related litigation in May, including $10 billion in disputed mergers and acquisition deals that landed in Delaware's Chancery Court during one seven-day period in May. "Material adverse effect" clauses need to be carefully drafted or they will be carefully scrutinized by a court or arbiter.
Thursday, May 14, 2020
Readers of this blog know that mandatory arbitration clauses lurk in all kinds of standard form contracts, including those that govern the relationship between companies and their workers (whether these workers are classified as independent contractors or employees). Arbitration clauses combined with class action waivers are a powerful way for companies to prevent workers from suing over workplace disputes. But in February,* U.S. Judge William Alsup issued an order compelling arbitration against a company that was trying to wriggle out of it.
That company was Door Dash which faced arbitration claims from 5,879 workers who disputed their labor classification and had clicked to agree to the terms of the company’s terms, which contained a “Mutual Arbitration Provision.” This was a contract that Door Dash had drafted, so what was the problem?
The American Arbitration Association (AAA) requires that individuals pay a filing fee of $300 and companies pay a filing fee of $1900. That’s over $11,000,000 in arbitration filing fees for Door Dash. Door Dash isn’t the first company to be faced with mass arbitration claims and hefty filing fees. Over 12,000 Uber drivers filed arbitration claims against Uber. The non-refundable filing fee for each claim was $1500 so that filing fees alone would cost Uber over $18,000,000. Rest assured, there will be more such claims. Many, many more.
For years, defenders of standard form contracts and mandatory arbitration clauses have argued that their efficiencies should override fairness and consent problems. Now that plaintiffs attorneys are discovering how to use software to file claims more efficiently and on a mass scale, companies are discovering what it’s like to be on the receiving end of efficiency.
Judge Alsup’s motion notes the irony of companies trying to wriggle out of their own TOS:
“For decades, the employer-side bar and their employer clients have forced arbitration clauses upon workers, thus taking away their right to go to court, and force class-action waivers upon them too, thus taking away their ability to join collectively to vindicate common rights. The employer-side bar has succeeded in the United States Supreme Court to sustain such provisions. The irony, in this case, is that the workers wish to enforce the very provisions forced on them by seeking, even if by the thousands, individual arbitrations, the remnant of procedural rights left to them. The employer here, DoorDash, faced with having to actually honor its side of the bargain, now blanches at the cost of the filing fees it agreed to pay in the arbitration clause. No doubt, Door Dash never expected that so many would actually seek arbitration. Instead, in irony upon irony, DoorDash, now wishes to resort to a class-wide lawsuit, the very device it denied to the workers, to avoid its duty to arbitrate. This hypocrisy will not be blessed, at least by this order.”
Ouch. And bravo.
*I know, it’s May now, but it’s been a crazy couple months, don’t you agree?
Wednesday, May 6, 2020
There I was, minding my own business, listening to "Here and Now" on NPR from WBUR in Boston, when the words "force majeure" pricked up my ears. The report began by noting that New York's Metropolitan Opera had laid off its union workers, invoking a force majeure in the company's contract with its workers.
To further inform its listeners about force majeure clauses, the show sought the sage counsel of our own Nancy Kim! You can read the story and listen to the interview with Nancy here.
Tuesday, May 5, 2020
Ben Davis, of the University of Toledo College of Law, has posted Worker Endangerment in the Meat Industry During COVID-19 on Jurist. The post comments on the President's Executive Order relating to the food supply chain. The Executive Order was a response to the closing of some meat and poultry processing plants in response to outbreaks of COVID-19 at the plants.
The executive order suggests that the plants closed due to state action and alleges that state regulations "may differ from or be inconsistent with interim guidance recently issued by the Centers for Disease Control and Prevention (CDC) of the Department of Health and Human Services and the Occupational Safety and Health Administration (OSHA) of the Department of Labor." Ben's post makes clear why state regulations might differ with CDC and OSHA guidances, which are filled with what he calls "mealy-mouthed phrases" but I would call weasel words. Basically, the guidances say that, ideally, plant operators should consider allowing workers to socially distance themselves if feasible. If states imposed stricter guidelines, they saved lives.
It is not true that state action is the cause of the closures. Rather, the companies are closing their plants on their own. I didn't know that lying in executive orders was a thing now, but I concede, that was very retro thinking. Moreover, workers do not want to work in unsafe conditions, and thus the Executive Order many not have any effect, according to this CNN report.
According to the Executive Order, the closures "threaten the continued functioning of the national meat and poultry supply chain, undermining critical infrastructure during the national emergency." As a pescatarian, I can only say, "Really?"
But I digress.
Ben's post highlights the precarious predicament that workers might face as a result of the Executive Order. They may face a Hobson's choice of returning to an unsafe work environment or losing their unemployment benefits. Ben cites to reports that some governors, like Iowa's Kim Reynolds (left) and Texas's Greg Abbott (right), are threatening to withdraw such benefits from workers who "voluntarily quit." The issue goes beyond the plants and could affect workers in many areas of the economy that are opening up before their workers feel safe returning to their jobs.
Friday, July 5, 2019
For very good reason, a black family fires a contractor who showed up for a job with a confederate flag on his truck in GA. This raises issues of whether one can simply terminate a contract once entered into (one cannot with out at least having to pay damages, potentially in the form of wasted time and gas money here) or whether this was simply an at-will contract that can be terminated (that does not seem to be the case here.). At any rate, isn't it incredible that in 2019, some "proud Southerners" still have to display their pride in such a blatantly tone deaf manner? Racism ought to be a thing of the distant past, but clearly is not. Shameful!
Wednesday, June 26, 2019
I had been paying attention to this case out of the Western District of Washington, Moi v. Chihuly Studio, Inc., Cause No. C17-0853RSL (behind paywall), because it raises interesting copyright authorship issues. The case is a lawsuit brought by a person who was one of Chihuly's assistants, who create artwork in Chihuly's name under Chihuly's supervision. The plaintiff worked for Chihuly in this way for fifteen years, until a falling-out between Chihuly and another of the assistants resulted in the deterioration of the plaintiff's relationship with Chihuly as well. The plaintiff filed this lawsuit alleging co-authorship of 285 artworks and requesting compensation for his work on them. You can read more about the lawsuit here.
As I said, I was paying attention to this case for the copyright authorship analysis, which follows the Aalmuhammed test and finds that, because the plaintiff did not exercise control, he is not an author of the artworks, despite his copyrightable contributions to the artworks. The authorship test analysis also considers the lack of contract between the plaintiff and Chihuly as indicating that Chihuly did not intend to share authorship with the plaintiff.
That same lack of contract dooms the plaintiff's attempt to seek compensation for his work. Because there's no contract, the plaintiff's cause of action is promissory estoppel, but Chihuly's promises over the years to compensate plaintiff by keeping track of which artworks plaintiff had contributed to were, in the court's view, too vague to constitute promises that the plaintiff could have relied on. The plaintiff confessed that he had no idea what his eventual compensation might be or when he would receive it, just that he trusted Chihuly to treat him "fairly." Promises forming the basis of promissory estoppel need to be clear and definite, and Chihuly's statements were simply too vague. Considering that plaintiff couldn't even say what they meant, the court refused to enforce them.
This is, once again, a lesson in making sure you have a clear and complete understanding with someone, and not just vague platitudes.
Monday, June 24, 2019
I just blogged about a consideration case last week, and now here's another one out of Illinois, Johnson v. Illinois Alcohol & Other Drug Abuse Professional Certification Association, Nos. 4-18-0562 4-18-0575 cons (behind paywall). This case concerns an at-will employment contract that was later modified to include a definite retirement date. The defendant argues that there was no consideration for this modification of the contract, and thus it's not binding. However, the court notes that Johnson gave up his ability to work for the defendant beyond the retirement date and that that served as consideration for the modification of the employment contract. There were also some changes in job duties and title as well as an additional agreement reached on how sick and vacation days would be used over the remainder of the employment term. All of this was sufficient to show that both parties bargained for things from the other in this new binding contract.
Monday, June 17, 2019
If you've already started thinking about gathering examples for your courses this fall, here's a consideration case for you out of Ohio, Forbes v. Showmann, Inc., Appeal No. C-180325. Forbes was an employee of Showmann, and at a holiday party Showmann gave its employees, including Forbes, raffle tickets. One of the prizes was what sounds like a pretty sweet cruise package, and Forbes won the cruise. Showmann terminated Forbes's employment a few weeks later and informed Forbes that the cruise package was conditioned on Forbes still being a Showmann employee when she took the cruise.
Forbes sued for breach of contract but the problem was that it was undisputed that Forbes did not pay for the raffle ticket. Showmann simply distributed the raffle tickets for free to its employees. Therefore, there was no consideration with which to form a contract. Forbes tried to argue her employment by Showmann was the consideration for the ticket but Forbes's employment was not used to bargain for the raffle ticket in exchange, so therefore there was no contract.
If you feel bad for Forbes, which I admit I kind of did based on these given facts, her conversion claim does survive, so there is some hope for her.
Tuesday, May 21, 2019
Democratic presidential candidate Kamala Harris has revealed a plan that would overhaul American discrimination laws to ensure that women and men are paid the same for the same work.
Under the plan, companies with 100 or more employees would, among other things, be required to obtain a federal certification showing they are not underpaying women. If they fail to do so, they may be fined. The burden would be on the employers to show that any pay gap is based on merit, performance, or seniority. If companies discriminate, they would be fined 1% of their average daily profits for every 1% of their average daily profits for every 1% gap that exists between the gender-based pay differential. The plan would also bar employers from asking job applicants about their salary history and ban forced arbitration in pay discrimination disputes.
Sadly, the answer is no. Women who work full time are paid an average of 80 cents for every dollar paid to men. For black women, the figure is 61 cents. For Latinas: only 53 cents. And we are talking about pay for the same jobs; not educational or other relevant differences.
Of course, this is just a proposal from a political candidate who at this point in time appears unlikely to win the race. But it raises an important, yet sadly not new, contractual problem, namely that of disparity in bargaining positions. As the situation is now, much of the burden of avoiding this problem is on the potential or actual employee. If a woman needs a job, how is she going to ensure that she is, in effect, paid the same as her fellow male workers? In other words, how would she even find out what males earn in a particular job? She can’t. And the pressure of adding one’s salary history is also known to create a bargaining inequality. This is an example of information asymmetry; a situation in which government action might help ensure a better situation for individuals who have proved unable to obtain that situation contractually. This is a political issue that will, of course, have to be decided by legislators. The free market is not producing an acceptable situation here as it is unacceptable that employers pay their employees differently simply because of gender. The fact that race makes the pay disparity even greater makes matters worse.
Monday, April 29, 2019
Would we really say that Weinstein's company's directors didn't approve of his pattern of sexual misconduct?
This, strictly speaking, isn't really a contract case, although there is an employment contract at issue so I guess that's how it got caught in my filter. But I read it and thought that this case is raising important enough issues that we should be discussing them.
The case is David v. The Weinstein Company LLC, 18-cv-5414 (RA), out of the Southern District of New York, and it's a case centering around the alleged sexual assault perpetrated by Harvey Weinstein on the plaintiff. The story the plaintiff tells is a familiar one to those who have read the Weinstein reporting, that "Weinstein asked her to meet him in his hotel room to discuss potential acting roles, and then, on one occasion, forcibly raped her." This decision isn't so much about Weinstein's conduct, though, as it is about the former directors of Weinstein's companies, who the plaintiff contends "enabled Weinstein's sexual misconduct, making them liable for general negligence and negligent retention or supervision."
The court dismisses the claims against the directors, and the reasons why were what caught my eye about this case. Plaintiff's allegations were that the directors were aware of Weinstein's harassing behavior toward women, based on a number of things: a written communication within the company calling his behavior a "serial problem" the company had to deal with; the characterization by a company executive of Weinstein's female assistants as "honeypot[s]" to lure actresses into meetings with Weinstein; a formal complaint by an employee about Weinstein's behavior; an employee memo summarizing two years' worth of allegations of sexual harassment and misconduct by Weinstein and characterizing the company as a "toxic environment for women"; the settlement of many sexual misconduct claims against Weinstein; and at least one police investigation into Weinstein's behavior.
None of the allegations established negligence on the part of the directors, according to the court. First of all, the directors did not owe the plaintiff a duty of care, and there is no case law that directors of a company can be held liable for an employee's tortious act. The plaintiff pointed to the fact that the directors renewed Weinstein's contract in 2015 with a provision that prevented Weinstein from being fired for sexual misconduct as evidence that they were enabling Weinstein's conduct, but the court found that this was "a far cry from them approving of Weinstein's sexual assault." While the court admitted that the directors "were not without moral culpability," their actions were not negligence as a legal matter.
Nor did the plaintiff assert a claim for negligent retention or supervision. The plaintiff did not show that Weinstein's sexual assault took place on the company's premises, since she asserted it happened at a hotel not affiliated with the directors. While the plaintiff argued that Weinstein used company credit cards to pay to the hotel room and lured her to the hotel room under the guise of a business meeting regarding employment by the company, that was regarding the company, not the directors sued here.
As a matter of law, the court's reasoning makes sense.
As a matter of recognition of how oppressive power structures work, this decision is terrible.
When I learned negligence way back in law school, I remember so many discussions about the policy behind it, about not wanting to hold people to a generalized duty to protect everyone on the planet, about how we decide proximate causation, about how it's really at heart about what we want to hold people liable for and what we don't.
So this decision makes sense in terms of worrying about generalized duties, of not dismissing the culpability of those committing the intentional tortious act. But it doesn't make sense in terms of thinking about the type of society we want to live in. The Weinstein reporting tells a story of serial abuse that was systemically protected for years by the power structure around Weinstein. To say that nobody else in the power structure was sexually assaulting women is a true statement of legal fact, but also seems disingenuous at this point. Weinstein's abuse was so widespread and lasted so long not only because of Weinstein but also because of the entire operation around him deflecting culpability for it.
The negligence analysis in this case feels like it's operating in a vacuum, which is kind of how we teach our students to think, presenting them with discrete hypotheticals, but might not be the best or most effective way to set up a fair legal system that protects the most vulnerable and least powerful in society. The societal discussion about the oppressive system that permitted Weinstein (and others) to perpetrate so much abuse has just begun, and maybe we should include how the legal system interacts with those power structures in the discussion. If negligence is all about policy decisions about who you need to protect and how much, then maybe we should have a policy discussion about how to make those decisions, especially if we're making them in the context of an abusive pattern that might be obscured by looking at things in isolation.
The plaintiff's allegations in this case contain many damning examples that many people around Weinstein knew about the disturbing pattern of sexual misconduct, and made affirmative choices to find ways to use the power structure to protect Weinstein. I appreciate the court's statement that the directors might be morally culpable but not legally culpable, and I recognize that law and morals are two different things. But I don't know that I agree that the director's actions are "a far cry from them approving of Weinstein's sexual assault . . . ." Given the allegations about what the directors knew and how they reacted to that knowledge, I think we could read their actions as indicating that they were a far cry from disapproving of Weinstein's sexual assault.
Wednesday, April 17, 2019
A recent case out of the Northern District of California, Sanchez v. Gruma Corporation, Case No. 19-cv-00794-WHO, is a good case to point to to remind students that unconscionability has both procedural and substantive sides, and you need to have both. In the case, the court admits that the plaintiff's account of the signing of the contract raised procedural unconscionability issues: the plaintiff alleged that he was given no choice, was told if he did not sign the contract he could not work at the company, was not told what the contract really meant, and was given no opportunity to review the contract. However, this procedural unconscionability ultimately didn't matter, because the court ruled the contract was not substantively unconscionable. There was one provision the court found unenforceable but the court severed that provision and enforced the rest of the agreement.
Thursday, March 14, 2019
An employer isn't bound by a policy unless the employee is aware of and relies upon the policy (e.g., reads the handbook!)
A recent case out of Illinois, Brown-Wright v. East St. Louis School District 189, NO. 5-18-0311 (behind paywall), finds that in order for an employee policy to operate as a binding contract, the employee has to have read the policy.
In the case, the plaintiff was suing based on an alleged violation of the sick leave payout policy. The plaintiff, however, did not find out about the policy her case was relying upon interpreting until after her employment ended. Therefore, it was not the case that she learned of the policy and continued to work as acceptance of and consideration for that policy. Because the plaintiff did not read the policy before terminating employment, she could not rely upon it now.
This is a lesson to all of us to read those policies our employers send around.
Thursday, February 28, 2019
Sometimes it can seem so tempting to draft the broadest possible non-competition provision, but a recent case out of the Western District of Arkansas, Foster Cable Services v. Deville, Case No. 1:18-cv-1049, reminds us of why that can be dangerous.
In the case, Deville, a former employee, had signed a contract that classified "all information" given to Deville by the plaintiff as a trade secret and/or confidential, with no time or geographical limitations. Deville left the plaintiff's employment and the plaintiff sued that Deville had breached his employment agreement because he had disclosed confidential information to his new employer.
The court agreed with Deville's contention that the agreement he signed was unenforceable. The contract prohibited Deville from disclosing any information he learned while employed by the plaintiff, forever. The court found this unreasonable. Covenants not to compete should be reasonably drawn to protect genuine confidential information, whereas this agreement was broad enough to cover all experience and knowledge that Deville gained during his employment, forever. Therefore, the court refused to enforce it as an unreasonable restraint on trade.
Tuesday, February 19, 2019
I just blogged about a case in which failure to keep proper records meant there wasn't enough proof of agreement to the arbitration clause, and here's another one out of Texas, Stagg Restaurants, LLC v. Serra, No. 04-18-00527-CV. Stagg tried to compel arbitration, but the employee denied ever receiving notice of the clause or the agreement it was contained in. There was no signature on that particular agreement and none of Stagg's records indicated that it had ever been provided to the employee, even though the records indicated many other documents had been provided to him. Once again: make sure you keep good records.
Monday, February 4, 2019
Keeping records on when and how your employees sign their arbitration agreements could be helpful if there's ever a dispute over them
I just blogged about an arbitration case, and here's another one out of California, Garcia v. Tropicale Foods, Inc., E069024. In the last case I blogged about, arbitration was compelled, but in this one, the court reaches a different conclusion, finding that the employer Tropicale failed to prove that Garcia signed the arbitration agreement. The case serves as a lesson to employers hoping to enforce arbitration agreements against their employees: They need to be able to offer information about the circumstances of the employee signing the agreement. Garcia maintained that she never signed the agreement, and in response Tropicale offered a declaration of an employee saying that Garcia did sign the agreement. But that bare declaration wasn't enough, according to the court. It did not offer any sense of the timing or circumstances of the signature, which were important in this case, since the date on the agreement looked like September 2015, but Garcia had been terminated in August 2015. Therefore, the court did not compel arbitration.
Friday, February 1, 2019
An arbitration clause that allows you to pursue injunctive relief in the court system still requires arbitration of the underlying claims
A recent case out of the District of Oregon, Sixel, LLC v. Penning, No. 6:17-cv-01846-AA, has a fairly typical fight over whether or not a claim needs to be arbitrated, but in this case it's the employer who doesn't want to arbitrate and the employees who are fighting to enforce the arbitration clause.
The case involves allegations of trade secret theft, and Sixel relies on the fact that the arbitration clause permits it to pursue injunctive relief in the court. However, the employees maintain that that is limited to the pursuit of relief and does not allow the litigation of the underlying claim in court. The court sides with the employees, finding that the exception to the arbitration clause is explicitly in its plain language only in terms of remedies, not any cause of action. The court therefore finds that Sixel can seek injunctive relief in court and pursue the underlying claims in arbitration. The claims in question fall squarely under the arbitration clause, and given the law's preference for enforcing arbitration provisions, the court chooses to enforce the provision.
Wednesday, January 30, 2019
I had previously blogged about this case involving a dispute between a university and its retired president over his retirement contract during its motion to dismiss phase. Now it's completed its trial, and the jury verdict is in. The jury ruled against the former president Taylor and in favor of the university, finding that the university did not have to pay Taylor under the asserted contract. It seems from the press coverage of the closing arguments that there were two warring versions of the facts: Taylor asserted that the board of trustees approved the contract as a reflection of Taylor's worth to the university. The university, however, asserted that Taylor drafted the contract himself and then had his friend, who happened to be the chairman of the university's board, sign it, meaning that it was never reviewed by university attorneys and never approved by the board of trustees.
h/t to Eric A. Chiappinelli of Texas Tech University School of Law for passing this one along!
Tuesday, December 18, 2018
A past consideration case reminds us that being recognized for your past hard work isn't good for your breach of contract claim
I don't know about everyone else but my casebook teaches past consideration using very old cases. Here's past consideration raised as an issue with a recent case out of the Southern District of California, Wright v. Old Gringo Inc., Case No. 17-cv-1996-BAS-MSB (behind paywall).
The case is really interesting, because the court acknowledged that the complaint had proper consideration allegations: ownership interest, salary, and performance bonuses in exchange for providing "expertise and services." The problem came from the deposition testimony, all of which seemed to establish that in fact the ownership interest had been provided as a reward for previous work. The plaintiff herself testified that the ownership interest was effective even if she immediately quit the job, indicating it wasn't in exchange for future services. Plaintiff's friends and relatives provided similar testimony, that the ownership interest was given "to show . . . appreciation" and "for . . . recognition of her hard work." There was no evidence presented that the ownership interest was offered on the condition of future work in exchange. For that reason, the court granted summary judgment for failure of consideration.
The plaintiff's remaining claims were permitted to go forward, including promissory estoppel and tort claims. Those claims (as I remind my students!) don't require consideration.
I find this case really interesting because I'm sure the plaintiff's friends only thought they were helping her with their testimony. This is the kind of thing that I think makes instinctive sense to non-lawyers: the plaintiff did something awesome and they recognized it by giving her an amazing gift. But lawyers know that consideration doctrine makes that a bad thing, not a good one.
(The decision also contains a statute of limitations and damages discussion.)
Wednesday, December 12, 2018
A recent case out of Illinois, Pam's Academy of Dance/Forte Arts Center v. Marik, Appeal No. 3-17-0803 (behind paywall but you can listen to the oral argument here), highlights the weirdness of just throwing extra words into a contract without thinking through what they really mean.
The dispute concerned a noncompete between a dance studio and Marik, one of its employees. The covenant not to compete stated that Marik wouldn't engage in any similar business "for a period of not less than five (5) years," and wouldn't solicit any teachers or students "for a period of not less than three (3) years." The parties were arguing over whether this language meant "five years" and "three years," or whether it meant that the noncompete could extend past five and three years.
In a vacuum, the statement "not less than five years" reads as "at least five years" to me, meaning that the time period could last longer. But as a matter of contract interpretation, that makes no sense. Could the noncompete theoretically go on for 50 years? After all, that would be a period "not less than" five. On the other hand, as the defendants argued, interpreting the time periods as five and three years would render the "not less than" language as "mere surplusage" -- an interpretation courts usually strive to avoid.
The court noted that contract interpretation's goal is to discern the intent of the parties. "Not less than" has been interpreted by Illinois courts in a variety of ways, but never in the context of a noncompete. However, many out-of-state courts had come to the conclusion that, in a covenant not to compete, "not less than five years" should be construed as meaning five years. This would prevent the employer from arguing that the noncompete was violated six years later. Indeed, the court thought that arguing that it meant six years would amount to bad faith.
Whether the five- and three-year periods were reasonable was a fact-based inquiry that had to be determined by looking at the totality of the circumstances.
This is a situation where I'm sure the "not less than five years" language sounded fancy and official but it was truly pointless. I think the employee probably understood it to be five years and three years (to the extent that the employee read and understood the agreement), and to the extent the employer understood the language to mean otherwise and entitle it to set an indefinite time period, I'm with the court that that's an unreasonable interpretation.
Monday, December 3, 2018
Sorry for being absent lately. Blame exam season! So this is slightly old news but I plan to bring it up in my Entertainment Law class in the spring, so I was doing a sprint through the news reporting on it: Taylor Swift and her new contract.