Netflix Renews Legal Attack on Fox Employment Contracts

Fox Studios-Getty-H 2019
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On Friday, Netflix took its best shot at ensuring unrestricted mobility for those who work in the entertainment industry. In a case that began after the streamer recruited Fox executives, Netflix told a judge that its rival's employment contracts must be voided for illegality.

"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."

Netflix and Fox — really, Disney, given a merger — are continuing where both sides left off in June.

That month, Los Angeles judge Marc Gross largely took Fox's side in the battle pitting contractual certitude versus total economic freedom. The judge heard Netflix's arguments that these employment agreements were really disguised non-competes that forced personal service for longer than seven years and found distinctions that placed these contracts on the right side of California law.

But Netflix was allowed to amend its pleadings. And Fox hadn't fully satisfied the judge that it had established damage from Netflix's interference with employment contracts.

So now comes a new round of summary judgment briefing in advance of a Nov. 20 hearing, which will set the contours for a trial currently scheduled for late January.

This time, Fox hopes a judge will reject Netflix's public policy defenses once and for all.

"A fixed-term employment contract provides an employee income and job security for a contractually defined period of time," states Fox's memorandum. "It likewise increases the employer’s predictability in its workforce, enabling better planning, investment, and training, again benefitting employees who agree to fixed-term contracts. As this Court has recognized, such contracts are ubiquitous throughout California and the United States."

Netflix disagrees.

"The notion that fixed-term employment contracts like those used at Fox are 'ubiquitous in California' in 2019 is so outdated as to be outright false," responds Netflix's own memorandum. "Virtually no employers outside of the entertainment business use them for business professionals, which may explain why Fox cites as support Olivia De Havilland’s 1944 dispute with Warner Bros. — a case that, ironically, held firmly against the studio’s oppressive tactics, and did not concern business executives, but actors."

Netflix attempts to frame Fox's contracts as a "form of involuntary servitude." 

"It is striking that Fox’s contracts give employees no right to resign," continues Netflix. "In fact, many of Fox’s contracts go further and forbid employees from even seeking or exploring new employment opportunities until they are within 90 days of when their contracts end. The combined effect of the exclusion of a resignation provision that would allow employees to leave, and the inclusion of oppressive provisions designed to force them to stay, is untenable for people like Marcos Waltenberg and Tara Flynn, who no longer were willing to be forced to stay in their jobs at Fox."

The two sides debate whether various contract provisions are unconscionable, whether they're severable and whether there's enough of an arm's-length negotiation so that when Fox signs new fixed-term agreements with existing employees, the company doesn't violate California's "seven-year rule."

There's also attention on Fox's claim that Netflix has committed tortious interference.

Netflix insists that Fox can't demonstrate even $1 in damages resulting from the departure of the two executives whose flight has been the excuse to wage this legal war. Netflix even suggests that Fox saved money since the replacements are being paid less. Fox points to the cost of investigating and enforcing its contractual rights. Netflix responds that attorneys' fees came too late and can't suffice.