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Contract Requiring All Employees in Company Division to Be Fired Not Enforceable
Description A contract between a company and a division director stated that if he was ever fired, all employees under him would be fired. After he was fired, the appeals court agreed that this contract could not be enforced since none of those employees were party to the agreement.
Topic Employment Law
Key Words Termination; Covenant Not to Compete
C A S E   S U M M A R Y
Facts Freund, a commodities broker, contracted with Index Futures, a brokerage firm, to be an employee and create a "Freund Division" within the firm. The contract stated how the fees would be split and that either party could terminate on 30 days' notice. A key clause stated: "All personnel hired by Freund will remain in the division until termination. Said personnel will not be offered or given employment with Index ... without prior approval by Freund. This provision will remain in effect until one year after Index and Freund part company." Freund brought several people to Index as brokers to work with him. Index was sold to Man several years later. Man terminated Freund's employment with 30 days' notice, but retained the people Freund had hired despite his objection that they should be dismissed too. Freund sued Man for damages for failing to fire the other employees. District court held for Man. Freund appealed.
Decision Affirmed. "Illinois law is suspicious of employee covenants not to compete." None of the employees affected by the agreement between Freund and Index (Man) knew of this term in the agreement. They were not parties to the contract. They could not foresee such an impediment to their remaining with their employee if Freund left. Freund had no contract with the employees that he asserts should be dismissed, so they have no obligation to depart. The contract between Freund and Man regarding the other employees will not be enforced.
Citation Freund v. E.D. & F. Man International, Inc., - F.3d - (1999 WL 1085870, 7th Cir.)

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