The Law & Economics of Post-Employment Covenants: A Unified Framework

62 Pages Posted: 11 Jan 2007

See all articles by Mark Glick

Mark Glick

University of Utah - College of Social & Behavioral Sciences - Department of Economics; Parsons Behle & Latimer

Darren Bush

University of Houston Law Center

Jonathan O. Hafen

Parr Waddoups Brown Gee & Loveless

Abstract

This article seeks to provide a unified framework to the disparate treatment that post-employment covenants receive in federal and state courts. Plaintiffs seeking relief from (or enforcement of) such covenants in federal courts typically are subjected to an antitrust analysis known as the rule of reason: The restrictions contained in the covenant are balanced against the procompetitive benefits sought to be gained from the agreement. In contrast, in state courts such agreements have largely been subject to traditional contract analysis.

Our approach synthesizes the approaches used in both federal and state courts. We believe, for example, that it is insufficient to engage in a rule of reason cost-benefit calculation if there are issues such as duress, mutual mistake and other bargaining and market failures afoot. Likewise, finding a contract valid under traditional contract analysis does not address the important societal question of whether the agreement unreasonably restrains trade. Thus, courts must engage in both analyses, first determining whether the contract is valid under traditional principles and then determining whether the contract unreasonably restrains trade.

Keywords: covenants, antitrust, contracts, employment

JEL Classification: K12, K21, L4

Suggested Citation

Glick, Mark A. and Bush, Darren and Hafen, Jonathan O., The Law & Economics of Post-Employment Covenants: A Unified Framework. George Mason Law Review, Vol. 11, p. 357, 2002, Available at SSRN: https://ssrn.com/abstract=956591

Mark A. Glick (Contact Author)

University of Utah - College of Social & Behavioral Sciences - Department of Economics ( email )

1645 Central Campus Dr.
Salt Lake City, UT 84112
United States

Parsons Behle & Latimer

United States

Darren Bush

University of Houston Law Center ( email )

4604 Calhoun Road
Houston, TX 77204-6060
United States
713.743.3346 (Phone)

HOME PAGE: http://www.law.uh.edu/faculty/main.asp?PID=1365

Jonathan O. Hafen

Parr Waddoups Brown Gee & Loveless ( email )

Suite 1300, 185 South State Street
Salt Lake City, UT 84111
United States

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