This clause permits a SaaS (Software-as-a-Service) provider or customer to invoke force majeure when labor strikes prevent contractual performance. In SaaS agreements, performance typically means maintaining uptime, delivering services, processing data, and providing customer support. A labor strike—whether by the service provider's employees, critical third-party vendors, or even transportation workers—could theoretically disrupt these obligations. For example, if key engineers strike and the provider cannot maintain its servers, or if a data center's staff strikes and causes service degradation, the provider might claim force majeure to excuse downtime or delayed feature releases. Similarly, a customer might invoke labor strikes to excuse payment delays if their own operations are halted. This clause recognizes that labor actions are sometimes beyond a party's immediate control and may justify temporary non-performance.
However, this clause is problematic in the SaaS context because labor strikes are often foreseeable and manageable through contingency planning. SaaS providers typically maintain redundant systems, backup staff, and disaster recovery procedures specifically to ensure continuous service despite disruptions. Courts and customers expect high availability from SaaS providers, and allowing easy escape via labor strike claims undermines the reliability that customers depend on. Additionally, the clause creates moral hazard: a provider might not invest adequately in strike contingencies if it knows strikes excuse performance.
If you're a SaaS customer, resist this clause or severely limit it. Require that the provider can only invoke labor strike force majeure if: (1) the strike affects a critical facility or function that cannot be mitigated through redundancy or backup systems, (2) the provider has documented that it made good-faith efforts to maintain service (e.g., using backup staff, remote work, alternative vendors), and (3) the strike lasts more than a defined threshold (e.g., 48+ hours). Exclude strikes from force majeure if the provider failed to maintain adequate business continuity plans. If you're a SaaS provider, include this clause but pair it with specific service level agreement (SLA) credits or remedies: even if a strike excuses full liability, you should still offer service credits or extended contract terms to compensate customers for downtime. Define "labor strike" narrowly to exclude strikes by your own employees (which you can influence through labor relations) and focus only on third-party strikes beyond your control.
Frequently Asked Questions
What does this clause mean in simple terms?
This clause permits a SaaS (Software-as-a-Service) provider or customer to invoke force majeure when labor strikes prevent contractual performance. In SaaS agreements, performance typically means maintaining uptime, delivering services, processing data, and providing customer support.
Why should I care about this clause?
A labor strike—whether by the service provider's employees, critical third-party vendors, or even transportation workers—could theoretically disrupt these obligations. For example, if key engineers strike and the provider cannot maintain its servers, or if a data center's staff strikes and causes service degradation, the provider might claim force majeure to excuse downtime or delayed feature releases.
What are my options?
Similarly, a customer might invoke labor strikes to excuse payment delays if their own operations are halted. This clause recognizes that labor actions are sometimes beyond a party's immediate control and may justify temporary non-performance.
How does this affect small businesses?
However, this clause is problematic in the SaaS context because labor strikes are often foreseeable and manageable through contingency planning. SaaS providers typically maintain redundant systems, backup staff, and disaster recovery procedures specifically to ensure continuous service despite disruptions.