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.
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.
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.
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.