This morning was our annual viewing of the classic movie, Holiday Inn. This film is, of course, best known for the debut of Bing Crosby singing “White Christmas”, and was the prequel to the Bing Crosby/Danny Kaye film named after the famous tune.
The plot of Holiday Inn is simple enough: Jim Hardy (played by Bing Crosby) decides to convert his Connecticut farm into an inn that is open only on holidays. He finds a young lady named Linda Mason (played by Marjorie Reynolds) to team with him in the fifteen or so performances throughout the year. Jim’s plan is interrupted upon a visit from his performing friend Ted Hanover (Fred Astaire) on New Year’s Eve where Ted discovers Linda and seeks to make her his new dancing partner. After considerable scheming on Jim’s part to keep Linda and Ted apart, they leave together for Hollywood to star in a film based on the Holiday Inn. In the end, Jim and Linda are reunited, as are Ted and his former dancing partner, Lila Dixon (Virginia Hale) and all join in the New Year’s Eve finale.
Aside from some classic music written by the great Irving Berlin, along with Fred Astaire’s dance moves (my personal favorite is his 4th of July number where he dances through exploding firecrackers), the storyline of Jim Hardy’s attempts to keep Linda Mason working at the Inn contains some pertinent lessons for today’s employers, including the following:
1. Subject to Some Narrow Exceptions, Contracts Need to Be in Writing to be Enforceable. At one point, Linda Mason promises Jim that she will perform at all shows at the Holiday Inn for the year. While she initially cites this promise to Ted Hanover when he asks her to leave with him to be his new dancing partner, ultimately she chooses to leave with Ted for Hollywood. Written contracts are the law’s way of making promises enforceable. Handshakes, promises, “gentlemen’s agreements”, whatever you want to call them, are no substitutes for written agreements. This can be a difficult discussion to have, as the suggestion of having a written contract can, to some, imply a lack of trust in another party; nonetheless, a written contract is the only way for all parties to have a clear understanding of their obligations and what rights and remedies each party has to enforce the obligations of the other party/parties.
2. Absent a Written Agreement, Employment Relationships Are “At Will”. While Linda agreed in February to perform at every show for the year through December, at the conclusion of the 4th of July show, and following Jim’s scheming, Linda leaves for Hollywood, not to return until the New Year’s Eve show. Most employees in Minnesota and other states have the same freedom of contract that Linda did; that is, they can leave their employment whenever they wish, for any reason or no reason. If a business owner has a key employee that is integral to the success of the business, then that employee should have a written employment agreement that provides for a fixed term of employment. An employer can also include a covenant not to compete (described more fully below) to deter a key employee from leaving to work for a competitor. Absent this type of agreement, the key employee can leave at any time.
3. Use Non-Compete Agreements With Key Employees. Linda Mason left the Holiday Inn for a more lucrative job on a Hollywood film, and Jim Hardy could do nothing but watch her leave. What if Linda had signed a non-compete agreement with Jim barring her from leaving for another performing job? Covenants not to compete can be a powerful tool to protect your business from defections of top talent. Courts, however, do not favor these arrangements and employers must therefore use them only when appropriate and, even then, these restrictive covenants must be narrowly tailored to balance the interests of both employer and employee. To enforce a covenant not to compete against a former employee, the employer must show (i) the covenant not to compete was supported by consideration when it was signed (if the consideration for the covenant is the continued employment of the employee, then the covenant must be signed prior to the start of employment to be valid); (ii) the covenant protects a legitimate business interest of the employer (in other words, an employer may have grounds to have a sales employee sign a non-compete agreement but not the cleaning crew); and (iii) the covenant is reasonable in duration and geographic scope to protect the employer, without being unduly burdensome on the former employee’s right to earn a living.
Holiday Inn, of course, ends on a high note, with Linda returning to Jim and the Inn and Ted reuniting with his former dance partner and rekindling his friendship with Jim. Most real-life employers are not as fortunate, which is why these simple legal tips can help prevent unhappy endings with employees.