Netflix and 21st Century Fox are currently in a legal battle concerning entertainment executives under lengthy contracts. A struggle that seemed rooted entirely in the entertainment business has turned to threaten professional sports’ means of contracting players.
The case initially began when Fox sued Netflix when it recruited programming executive Tara Flynn and marketing executive Marcos Waltenberg.
Netflix claims Fox’s contracts, including those for Flynn and Waltenberg, restrict compensation, movement, and opportunities for competitor. Fox is counterclaiming unfair competition and arguing against any injunction that would prevent Netflix from soliciting, recruiting and inducing Fox employees to leave.
Netflix is also taking the stance that Fox’s practice of re-upping consecutive contracts is against California law. Fox countered the argument Tuesday by saying that NBA legend Kareem Abdul-Jabbar’s 14-year career as a Los Angeles Laker also violated the law.
According to Fox, “Netflix’s position reduces to the untenable proposition that two independent contracts must be treated as one under California law merely because they are consecutive — ‘back-to-back,’ in Netflix’s words — even though the second contract (i) was negotiated and signed after the first; (ii) contains terms materially different from the first agreement; (iii) does not incorporate or depend on the terms of the first contract; and (iv) applies to a different time period. On that remarkable theory, no employee in California may lawfully work uninterrupted for a single company for longer than seven years — according to Netflix, Kareem Abdul-Jabbar’s storied 14-year career with the Los Angeles Lakers was a violation of California law. To state the proposition is to refute it.”
Fox says its contracts are “consecutive — but separate — employment contracts.” In other words, while the contract applies to the same employee, it contains brand new language that reset the seven-year time frame.
“Were Fox to negotiate a successive employment contract only at the precise termination date of the initial agreement, each employee would be (rightly) anxious in the months preceding the expiration of a contract that she would no longer have a contract-guaranteed job come termination date,” Fox added. “And if negotiations took several days or weeks, as arms-length contract negotiations often do, the employee (even if she ultimately chooses to sign a new contract) would lack contract-guaranteed benefits and salary for an indeterminate negotiations period. Netflix cannot justify a legal rule that would require a break in employment every seven years, and thus deprive a significant portion of the California workforce of fundamental elements of job security.”
Abdul-Jabbar’s career example doesn’t stand alone. Contract extensions happen every year in every professional sports league. Legendary careers such as Tom Brady, Kobe Bryant and Derek Jeter see players spend their entire 20-year career with one team without a thought of leaving for another team.
The case could extend to current player contracts as well. The Hollywood Reporter speculated in March that a Netflix victory could allow Anthony Davis to leave New Orleans and sign with another team immediately
Regardless of who comes out on top in the court case, the outcome could change the foundation of athlete contracts. Whether that means a revision of the seven-year law or simply a change to the language of contracts remains to be seen.
