California employers and executives might view fixed-term employment agreements in a new light following a California appellate court’s unpublished decision suggesting employers do not violate California’s long-established policy promoting employee mobility when they enter into these types of agreements. The court’s ruling affirmed a lower court’s order enjoining Netflix from soliciting employees who had fixed-term employment agreements with Twentieth Century Fox Film Corp. and Fox 21, Inc. (“Fox”). But before opting to use fixed term contracts, it is important to consider the unique facts of this case, the rulings that stem from it, and its practical impact.

The Facts

Fox entered into fixed-term employment contracts with certain of its employees, which required Fox to employ them for several years. Fox admitted that it used fixed-term contracts to control employees and maintain leverage but argued the contracts created stability and predictability in the parties’ economic relationship for the contract’s term.

The contracts contained other provisions that helped Fox exercise control over the relationship. For example, the contracts provided Fox with the unilateral option to renew each agreement for additional years, and allowed Fox to seek an injunction to stop the employees from breaching their agreements. Many contracts also had employee non-solicit provisions and “no shop” provisions that prevented the employees from seeking or negotiating new employment more than 90...

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