Netflix Files Countersuit Against Fox, Calls Its Employment Agreements ‘Unenforceable’

The streaming giant hit back after Fox sued over alleged employee poaching last month

Last Updated: October 19, 2016 @ 5:41 PM

Netflix has taken aim at Fox, filing a counter complaint against the studio’s lawsuit over alleged employee poaching that claims the network’s employment agreements are invalid under California law — and thus, deserve to be broken. The streaming giant also plans to go after more Fox employees.

In its Oct. 19 complaint, Netflix’s attorneys argued that Fox’s employment agreements unfairly prevented TV and movie production employees from switching jobs, and made it much harder for an upstart content creator to break into production, given the limited number of veteran executives. The streaming giant argued that those agreements go against California law, “which prizes employee mobility and enshrines it in public policy, statute and case law.”

“Through its widespread use of unlawfully restrictive fixed-term employment agreements, Fox is facilitating and enforcing a system that restrains employee mobility, depresses compensation levels, and and creates unlawful barriers to entry by Netflix and others competing in the film and television production business in violation of California Business and Professions Code Section 16600,” the complaint said.

However, in a statement to TheWrap made later Wednesday after the legal filing, Twentieth Century Fox and Fox 21 said: “Netflix is defiantly flouting the law by soliciting and inducing employees to break their written fixed-term employment agreements. As Netflix expressly acknowledges, California law fully recognizes that fixed-term employment agreements are valid and enforceable. These employment contracts are sought by many employees in the media industry because they guarantee tangible benefits. We look forward to vindicating our rights in Court.”

Last month, Fox sued the streaming giant over its alleged poaching of Fox employees. Fox claimed Netflix actively encouraged employees to decamp, even though they had fixed-term employment agreements. Fox named Marcos Waltenberg, formerly a vice president of marketing, partnerships and promotions, and Tara Flynn, an executive director and later vice president of creative, in its September complaint.

Netflix contends that Fox’s fixed-term agreements run counter to the “broad principle of employee mobility [that] is at the heart of our state’s innovation and economic prosperity that is the envy of many around the world.”

“Fox engages in the widespread use of unlawfully restrictive fixed-term employment agreements, and requires otherwise typically at-will employees to enter into such agreements as a condition of employment and promotion,” its complaint said.

Netflix also brought up the cases of Waltenberg and Flynn, both of whom the company alleged “were subject to fixed-term employment agreements with additional option years Fox exercised unilaterally.” When the two announced their decision to join the streaming company, Fox threatened retaliation and refused to allow them to terminate their contracts early, according to the complaint.

Netflix is asking for Fox to pay its attorney’s fees and any other sum “the Court may deem proper,” claiming to have “lost money or property as a result of Fox’s attempts to enforce unlawful fixed-term employment agreements” against Waltenberg, Green and others. Its also asking for a declaration that confirms its “rights to recruit, hire and/or retain Fox’s current and former employees who are subject to fixed-term employment agreements.”

Pamela Chelin contributed to this report.