Are Restrictive Covenants Enforceable Against In-House Counsel?
The use of noncompete and nonsolicitation agreements are common in many industries, but agreements prohibiting lawyers from competing are generally unenforceable.
January 08, 2018 at 12:01 AM
5 minute read
You have been working as in-house counsel at a company for a number of years but are ready to make a move. After wading through the hiring process, you have accepted a position as associate general counsel at a company that competes, in part, with your current employer. You hand in your resignation and announce where you are going. Your employer responds by pulling out your employment agreement, pointing to a restrictive covenant and telling you that you are not allowed to work at the new company.
Maybe you vaguely remember signing the agreement. Maybe you don't. Either way, the employment agreement contains a noncompete provision that seemingly will prevent you from working at the new company. Will your current employer be able to stop your move?
The use of noncompete and nonsolicitation agreements are common in many industries, but agreements prohibiting lawyers from competing are generally unenforceable. This prohibition is baked into the Georgia Rules of Professional Conduct and has been recognized by courts around the country.
Rule 5.6 provides that a “lawyer shall not participate in offering or making … a partnership or employment agreement that restricts the right of a lawyer to practice after termination of the relationship.” The policy justification behind this rule is that a restrictive covenant “not only limits [attorneys'] professional autonomy but also limits the freedom of clients to choose a lawyer.”
While the Georgia bar has not elaborated on the issue, the American Bar Association and a number of other jurisdictions have concluded that the Rule 5.6 prohibition on restrictive covenants generally applies to lawyers who are employed as in-house counsel. Restrictive covenants come in different forms, and below is a discussion of three of them.
Noncompetes
A noncompete provision preventing an in-house lawyer from working as a lawyer at a competitor company is generally not enforceable. That said, in-house counsel sometimes perform certain job functions that are not considered the practice of law.
Recognizing the nonlegal roles lawyers may have, some jurisdictions have found enforceable noncompete provisions that relate solely to nonlegal business roles. To be enforced, such provisions should include a so-called “savings clause,” making it clear that the contractual obligations do not restrict the attorney's right to practice law under Rule 5.6.
Even without a noncompete, a move to a competitor may still be severely curtailed or prohibited by Rule 1.9, which deals with conflicts of interest involving former clients.
Nonsolicitation Agreements
Many employers rationally want to prevent employees from leaving and taking customers or other important employees with them. Enter the nonsolicitation provision.
Depending on how they are drafted, such provisions may or may not be enforceable against in-house lawyers. For example, if the provision prohibits an in-house lawyer from serving the company's customers as a lawyer, it would violate Rule 5.6, because it would improperly restrict the lawyer's ability to practice law.
Likewise, if the provision prohibits an in-house lawyer from soliciting other lawyers and legal staff from the company, it would probably be unenforceable. Courts and ethics opinions in other jurisdictions have held that other lawyers and paraprofessionals may be essential to best serve a lawyer's clients, so any prohibition on soliciting other lawyers or key paraprofessionals would likely violate Rule 5.6.
As with other types of restrictive covenants, and assuming a nonsolicitation provision is otherwise enforceable under Georgia law, the use of a savings clause would eliminate Rule 5.6 concerns, make such a nonsolicitation enforceable and prevent an in-house lawyer from soliciting nonlawyer staff or customers for nonlegal purposes.
Confidentiality Provisions
Employment agreements commonly contain provisions prohibiting the disclosure of a company's confidential and trade secret information. It is not unreasonable for a company to want to protect such information and prevent disclosure by former employees, including in-house counsel.
Rule of Professional Conduct 1.6 requires a lawyer to “maintain in confidence all information gained in the professional relationship with a client.” In light of the very broad Rule 1.6, some jurisdictions have concluded that a confidentiality provision would be superfluous and unnecessary.
But it is conceivable that an in-house lawyer could obtain confidential information or trade secrets that would not fall under the scope of Rule 1.6, particularly if the lawyer's role is primarily a business one with only a minor legal function. In addition, an employer may want to tie confidentiality obligations to a contractual provision, as opposed to an ethical rule, to provide it with a contractual remedy, if a violation occurs.
Several jurisdictions have approved confidentiality provisions in employment agreements with in-house counsel, if such provisions contain a “savings clause.” Georgia would likely take a similar approach.
Jonathan E. Hawkins is a partner in the Atlanta firm of Krevolin & Horst. He represents clients in numerous business sectors in high stakes, complex commercial litigation and serves as outside general, business and ethics counsel to lawyers and law firms.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllGa. Appellate Judges Mull Landlord Responsibility in Premises Liability Case Involving Child Shooting
Corporate Lawyer Accused of Extortion Pushes Back Against $3.7M Judgment
6 minute readMetLife Attorney's Switch to Nelson Mullins Continues String of In-House Moves to Law Firms
3 minute readTrending Stories
- 1The Growing PFAS Morass: Why Insurance Should Cover These Products Liability Claims
- 2Dallas Jury Awards $98.65M in Botham Jean Killing by Dallas Officer
- 3In Talc Bankruptcy, Andy Birchfield Skipped His Deposition. Could He Face Sanctions?
- 4Pharmaceutical Patents: Benefits and Challenges
- 5Where Do Web-Tracking Class Actions Belong? 8th Circuit Weighs the Issue
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250