The February 29, 2012, issue of New England In-House features Russell Beck addressing noncompete agreements for in-house counsel in an article called “Are New England’s in-house counsel free to join competitors?”
Many companies ask new employees to agree to restrictive covenants as a condition of employment. These restrictive covenants can take a variety of forms, including the familiar non-compete agreements and nondisclosure agreements, as well as forfeiture agreements, no-raid agreements, and assignment of inventions agreements.
Unlike most employees, however, lawyers are generally not permitted to enter into noncompete agreements. Rule 5.6 of the Rules of Professional Conduct bars attorneys from entering into noncompete agreements. However, the language in Rule 5.6 leaves open the question whether in-house counsel are always prohibited from entering into non-competition agreements.
In his article, Russell Beck refers to the American Bar Association for an answer:
Despite those questions, the American Bar Association has determined that Rule 5.6 applies not just to outside lawyers, but to in-house counsel as well.
And, as the New Jersey Advisory Committee on Professional Ethics (relying on Virginia, Illinois, Connecticut, Washington and Philadelphia bar opinions, as well as cases involving outside counsel) assayed, “the overwhelming majority of jurisdictions in the United States follow the ABA’s approach and hold that restrictive covenants affecting lawyers, whether employed by corporations or private law firms, generally violate state ethical standards.
Thus, while it is clear that attorneys, including in-house counsel, are generally not permitted to enter into noncompete agreements, one possible exception is based on the role that the in-house counsel takes in his/her new company:
In contrast, it is only when the non-compete prohibits in-house counsel from taking a purely business role that the agreement would likely be enforceable.
Thus, for example, a non-compete that prevents in-house counsel from going to a competitor as a COO would likely be enforceable.
The rationale for that exception to the exception is that the individual’s status as a lawyer is irrelevant to the role and, therefore, client choice for legal services is not at issue.
Russell Beck concludes the article with a reminder that, although in-house counsel are generally free to move about without the burdens of a noncompete agreement, they are not free from all restrictions.
So, while you are almost certainly free to move from in-house job to in-house job, and to bring legal support staff of your choosing, you are not free from all restrictions. Confidentiality and conflicts rules and certain restrictive covenants will govern your transition.
Russell Beck’s complete article appears here.
Beck Reed Riden LLP is Boston’s innovative litigation boutique. Our lawyers have years of experience at large law firms, working with clients ranging from Fortune 500 companies to start-ups and individuals. We focus on business litigation and labor and employment. We are experienced litigators and counselors, helping our clients as business partners to resolve issues and develop strategies that best meet our clients’ legal and business needs – before, during, and after litigation. We’re ready to roll up our sleeves and help you. Read more about us, the types of matters we handle, and what we can do for you here.
- Over sixteen years of working on trade secret, noncompete, and unfair competition matters
- Authoring the book Negotiating, Drafting, and Enforcing Noncompetition Agreements and Related Restrictive Covenants (4th ed., MCLE, Inc. 2010), used by other lawyers to help them with their noncompete cases
- Drafting and advising on the current bill pending before the Massachusetts Legislature to define, codify, and improve noncompetition law
- Teaching Trade Secrets and Restrictive Covenants at Boston University School of Law
- Founding and administrating the award-winning blog, Fair Competition Law