George Mason School of Law Contracts I R. Termination Clauses and Non-competes F.H. Buckley fbuckley@gmu.edu

Responses to Agency Costs? Legal standards (e.g., best efforts) Incentivize the parties Relations and Iterated PD Games Vertical Integration Monitoring plus termination rights

Wagenseller 356 Scottsdale Memorial Hospital

Wagenseller 353 The moon is out early tonight…

Wagenseller Was she fired for reasonable cause? Should that matter?

Wagenseller Was she fired for reasonable cause? The English reasonable cause standard vs. the American “at will” standard

Wagenseller Was she fired for reasonable cause? The English reasonable cause standard vs. the American “at will” standard Developing exceptions to the at will standard The public policy exception E.g., refusal to commit perjury

Wagenseller Was she fired for reasonable cause? The English reasonable cause standard vs. the American “at will” standard Developing exceptions to the at will standard Implied in fact promise of tenure An implied promise to keep the employee on for a period of time Is this a question of free bargaining?

Wagenseller Was she fired for reasonable cause? The English reasonable cause standard vs. the American “at will” standard Developing exceptions to the at will standard Implied in fact promise of tenure Is the firm’s personnel manual part of the contract? Does it matter if this is signed?

Wagenseller Was she fired for reasonable cause? The English reasonable cause standard vs. the American “at will” standard Developing exceptions to the at will standard “Good faith and fair dealing” Bad faith firing vs. no-cause firing

Wagenseller Which rule best protects employees? English or American?

Wagenseller Which rule best protects employees? Should the parties be permitted to bargain for the employment regime they want?

George Mason School of Law Contracts I R. Termination Clauses and Non-competes F.H. Buckley fbuckley@gmu.edu

Are there limits to free choice? Firing employees when this contravenes public policy The distinction between franchise and non-franchise terminations in Sysco Non-competes

Sysco at 362

Sysco What did the agreement say about termination rights?

Sysco Who were the parties and why did that matter?

Note the two-way play The employer has a free hand to dismiss the employee under the at-will standard The employee can resign any time

Note the two-way play The employee can resign any time Might the employer be unhappy with this? Labor shortages Firm-specific assets Training Proprietary info

Note the two-way play The employee can resign any time Can you think of some way in which the employer might bargain around this?

Note the two-way play The employee can resign any time Can you think of some way in which the parties might bargain around this? Compensation schemes Non-competes

Non-competes: Farber at 372 Freedom of contract governed in Sysco. Why not in Farber?

Non-competes: Farber at 372 Freedom of contract governed in Sysco. Why not in Farber? Whom are we protecting by limiting freedom of contract here?

Non-competes: Farber at 372 What if we were talking about an accountant?

Non-competes: Farber at 372 What if we were talking about an accountant? Cf. Marcam at 379 Cf. Maltby at 379

Non-competes: Farber at 372 Just how many years is excessive?

Non-competes: Farber at 372 How could a severance clause help the employer?

Restatement Restatement 186: Covenants unreasonably in restraint of trade are not enforceable

Restatement Restatement 186: Covenants unreasonably in restraint of trade are not enforceable Ancilliary vs non-ancilliary?

Ancilliary Restraints on Trade Restatement 188: If ancilliary to a valid contract, covenants in restraint of trade may be enforceable

Ancilliary Restraints on Trade Restatement 187: If not ancilliary to a valid contract, covenants in restraint of trade deemed not enforceable

Non-competes What is an ancilliary agreement? Cf Leatherman at 378