In Part 1 of The Yoga Teacher's Employment Contract, we looked at whether employment contracts between the yoga studio and yoga teacher are useful and appropriate, and whether such contracts can facilitate the professional relationship between the studio and the teacher. We also looked at the essential elements of a contract—an offer, an acceptance, and the bargained-for exchange known in the law as "consideration"—and how they might apply to the yoga studio-teacher contract.
In this column, we enrich that discussion by delving into some of the more detailed legal rules that can affect how yoga teachers can structure negotiated deals with yoga studios (or gyms and other institutional employers). We will also look at what can happen if the studio-teacher relationship changes, and/or either side fails to honor the legally binding promises it has made to the other.
Clarity is Key
To start, the legal elements of a contract—offer, acceptance and consideration–are not always straightforward. These elements can go awry when the parties fail to manifest essential agreement. One area in which agreement can get fouled up is that of "mistake."
Consider the classic case of Rose 2nd of Aberlone. The parties contracted for sale of a supposedly barren cow, but Rose 2nd turned out to be pregnant and thus to be worth much more than the sale price. The court decided that if both parties had thought the cow was barren, the contract would be voidable (meaning that either side could cancel the contract) on grounds of mutual mistake.
The case stands for the principle that by law, a legally binding contract has to manifest a "meeting of the minds" regarding the essential terms. If both parties make a mistake, there is no such meeting.
Most contracts with yoga teachers will be for cash and not cows, but there could be mistakes about essential terms if the parties leave things too informal. The best way to avoid mutual mistakes, and for the yoga studio and yoga teacher to have a true "meeting of the minds," is to ensure the legal agreement is in writing, setting forth the essential terms of the agreement, in plain English that is understandable to both sides. A longer document is not necessarily a wiser one; nor do rhetorical flourishes and Latin phrases improve a contract.
Elements of the Contract
The purpose of the employment contract is to set forth each side's duties and obligations, including: the criteria by which the employee's performance will be measured, the reasons for termination, what may happen in the event of termination, and conflict resolution mechanisms, if any. Staying fuzzy about the promises exchanged is unnecessary, distracting, and unhelpful.
Whether hiring a lawyer or evaluating a contract someone else has drafted, think of the contract in terms of yogic principles: clarity rules. Patanjali wrote that when the thought-waves of the mind are stilled, we rest in our essence, which is bliss. Little roils up the thought-waves of the mind like the prospect of a lawsuit, or trying to figure out one's legal rights and obligations because the contract is unclear. Obfuscation in the language will only cloud the relationship and exacerbate tensions if there is later disagreement. So the first word of advice to the yoga studio or teacher contemplating an employment contract is: read the document carefully and be sure you understand every provision. If something is unintelligible, rewrite it (or ask your lawyer to rewrite it) in plain English so it is easily understandable. "Don't worry about that phrase" is not a satisfactory answer.
Breach of Contract
Another important way to evaluate a contract is to think about what can happen if the other side later violates ("breaches") the contract. What makes a legally binding contract different from a set of promises is that in the event of a breach, the contract provisions can be enforced in court.
The remedy for breach of contract typically consists of money damages, in an amount intended to restore the injured party to the economic position that he or she expected from performance of the promise or promises (this is known as an "expectation measure" of damages). Because courts generally deem expectation damages sufficient, are reluctant to force people back into employment situations, they rarely order the parties to fulfill the contractual promises (a remedy known a "specific performance").
So, for example, if the studio contracts to hire a yoga teacher to teach 15 classes a week, at $40 per class, over 50 weeks, and after one month (during which the studio has paid the teacher), terminates the teacher in a way that breaches the contract, the damages will likely be 15 classes x $40 x the remaining 26 weeks, or $37,600. The law typically does not allow punitive damages—monetary recovery many times the actual amount of loss, intended to "punish" the defendant—unless there is proof of actual fraud, meaning an initial intent to deceive.
Some yoga teachers might wonder, why think about breach of contract before I even sign it—why contemplate the end of a legal relationship when it is just beginning? Understanding the remedies for breach up-front can help shed light on what will happen if the situation ultimately does not work out—thus helping one prepare contingencies and protect oneself financially in case of later trouble. Further, for many professionals, to know in advance and mentally prepare for the worst-case scenario can help not only structure the deal at the outset, but also reduce anxiety once the contract is signed, and thus contribute to a constructive professional relationship overall.
Understanding remedies can also help if, in the midst of things, a dispute arises. If, for some reason, after a period of time, either side starts thinking of walking away from the contract, it may be useful to try to stave off a lawsuit by settling. Understanding the measure of damages—what the case would be worth if the plaintiff wins—can help the yoga studio or teacher negotiate a wise settlement. And, bearing Patanjli's wisdom in mind, the best settlement is a fair one: an arrangement that does justice to all sides, and thus lets both walk away without enduring rancor.
In addition to thinking about the ultimate remedies for breach—should the relationship deteriorate to this point—and the option of trying to negotiate a fair settlement, yoga teachers and studios should understand the legal requirement known as "mitigation of damages." This rule means that if the contract is breached, each side has a legal obligation to try to mitigate (minimize) damages flowing from the breach. In other words, the studio can't simply turn away all its students, blaming a teacher who has walked out during a misunderstanding, and pile up income loss as contractual damages; nor can the teacher in such a case simply decide not to look for new work and again, pile up damages hoping to send the studio a bill. Both sides have to do their best to recover. Keeping the rule of "mitigating damages" in mind will also help those who do find themselves in a dispute to find a fair way to settle the argument. In general, lawsuits are costly, troublesome, and taxing: it is often better to resolve disputes through cool conversations, perhaps with the help of trained mediators, than to let anger lead failed relationships to the courthouse door.
One final legal wrinkle about the contractual process between yoga studios and teachers is worth noting: in general, contracting parties typically reduce legal agreements to writing. This way, the terms are set forth in language that can guide the parties during their professional relationship; or that a court can later interpret, if it has to. But some oral contracts still can be enforceable, so long as the legal elements of offer, acceptance, and consideration are present.
Get it in Writing
Because of the concern for fraud, the law limits the kind of oral contracts that are enforceable. A legal rule known as the "statute of frauds" lists the kind of contracts that are unenforceable if oral—that is, unenforceable unless reduced to writing. The list of such unenforceable oral contracts includes contracts that, by their terms, cannot be performed within one year.
"By their terms" means that the contract terms expressly preclude performance during one year. For example, a two-year contract for yoga teaching cannot be performed during one year, and therefore must be in writing to be enforceable. On the other hand, if the yoga studio and teacher contemplate that the yoga teacher might stay for, say, six months to three years, but they do not specify a definite term, then the contract does not fall within the Statute of Frauds—in other words, it is still enforceable even if only oral. In many states, though, even such an oral contract, to be enforceable, must at least be evidenced by a written memorandum, setting forth the terms, signed by the party against whom a party is seeking to enforce a deal. For example, if the yoga teacher is suing the yoga studio to enforce a contract term of six months, the studio owner must have written such a memorandum, even informally. And in many states, if such a memorandum is lacking, the contract still can be enforced where one of the parties admits the existence of a valid oral contract, where the oral promise has been partly performed, or where one has induced justifiable reliance on the promise on the other's part.
These rules are complex, and as the ultimate outcome is factually dependent, and it is useful to hire legal counsel in complex situations that could lead to litigation. To avoid this situation, the best advice is to always put contracts in writing. That way you do not have to worry about the statute of frauds, and you do not have problems proving what you agreed to. The written contract is your evidence that you have a contract, and is evidence of the terms to which you agreed.
As suggested, the most important provisions of the legal agreement between yoga studio and teacher include: (1) the yoga teacher's duties, (2) the obligations of the studio to the teacher, (3) termination (reasons for ending the contract, and what obligations will still be owed on either side upon termination). In Part 3, we'll take a look at key contract provisions to negotiate for, and specific language to avoid.
The materials in this website/e-newsletter have been prepared by Michael H. Cohen, JD, MBA and Yoga Journal for informational purposes only and are not legal opinion or advice. Online readers should not act upon this information without seeking professional legal counsel.