Netflix v. Fox Asks When an Employment Agreement Becomes a Non-Compete

What is the difference between an employment agreement and a non-compete? That’s the question a Los Angeles court is considering in a case that began after Netflix recruited Fox executives. Netflix told a judge that its rival’s employment contracts must be voided for illegality, claiming that Fox can’t demonstrate even $1 in damages resulting from the departure of two executives whose resignation and subsequent hiring by Netflix is the crux of the suit. Netflix says that Fox actually saved money since the replacements are being paid less, but Fox points to costs associated with investigating and enforcing its contractual rights. “The fact that Fox’s contracts exist at all is extraordinary,” states a Netflix court brief. “Taken literally, they force employees to continue working even if they want to leave — a plain violation of the 13th Amendment to the U.S. Constitution — and prevent them from working anywhere else if they do leave before the end of their contract terms.” Last June, Los Angeles judge Marc Gross took Fox’s side, and found elements in the employment contracts that made them legal according to California’s famously tough restrictions on non-competes. Netflix was allowed to amend its pleadings, so there will be a new round of summary judgment briefing in advance of a Nov. 20 hearing, which will establish parameters for a trial scheduled for late January.