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Employment Contracts: Three Counterintuitive Appellate Decisions

June 28, 2010

By Paul Hastings Professional

True of false:

- Once an employment agreement expires, employment is terminable at will.

- Where a contract for a definite term states that employment can be terminated immediately for "any reason," employment is at will.

- Damages for breach of an employment contract are limited to the benefits that the employee coul dhave expected to receive had the contract been performed.

If you answered unequivocally "yes" to each of these questions, you'd be in good company among employment lawyers. And you'd be wrong.

Oliver Wendell Holmes observed that "it is the merit of the common law that it decides the case first and determines the principle afterwards." Later in his career, Justice Holmes would challenge his Supreme Court colleagues to provide him with a rule, however obscure or distant from the issue at hand, and he would contort the rule to support his opinion. Justice Holmes's penchant for legal gymnastics seems to have woven its way into New York contract law over th elast century and half.

This article examines three quirky and arguable counter-intuitive decisions in New York contract law that are difficult for practitioners to reconcile with their basic understanding of the common law, but equally difficult for them to ignore. Advocates involved in drafting, interpreting, or challenging employment contracts would be well advised to study these decisions.

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