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February 16, 2005

Breach of Contract Against Employees Who Like Their Work

Suppose Smith agrees to work for BigTV at a salary of $100,000 per year. The exposure is worth $300,000 to Smith, and Smith's talent is worth $500,000 to the company, so the deal splits the value equally between them. But then BigTV gets angry at Smith, whose talent value drops to 0, and takes him off the air while continuing to pay him. Should Smith win a lawsuit against BigTV? Via Drudge, the New York Observer we find a case that is a little like this, in connection with Rathergate: . . .

. . .
Mr. Howard, those sources said, has hired a lawyer to develop a breach-of- contract suit against the network. Ms. Murphy and Ms. West have likewise hired litigators, according to associates of theirs, and all three remain CBS employees and collect weekly salaries from the company that asked them to tender their resignations.

None would agree to participate in this article.

Legally, CBS and the ousted staffers are in an unusual stalemate: The network cannot be sued for breach of contract unless it actually fires them. Theoretically, the network could refuse to offer an apology or correct statements and simply drag its feet, continuing to write paychecks to the trio until their contracts expire. (Neither side would discuss how long the contracts are scheduled to last.)

The news report is probably correct that the common law would not award Smith the $300,000 in my hypothetical. Nonetheless, it is actually true that Smith has not gotten the benefit he expected from the contract. On the other hand, neither has BigTV, though not from any fault of Smith's. I'd have to think about this to come up with an answer.

Posted by erasmuse at February 16, 2005 07:44 AM

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