1. George Mason School of Law
Contracts I
R. Termination Clauses and Non-competes
F.H. Buckley

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

3. Wagenseller 356
Scottsdale Memorial Hospital

4. Wagenseller 356
The moon is out early tonight…

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

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

7. 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

8. 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?

9. 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?

10. 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

11. Wagenseller
Which rule best protects employees?
English or American?

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

13. 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

14. Sysco at 362

15. Sysco
What did the agreement say about termination rights?

16. Sysco
Who were the parties and why did that matter?

17. 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

18. 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

19. 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?

20. 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

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

22. 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?

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

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

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

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

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

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