The Intersection of Professional Ethics and Non-compete ClausesJanuary 28, 2017
A recent case out of Massachusetts discusses the use of professional rules of conduct in an attempt to keep an in-house counsel from working for a competitor.
Prudent employers take steps to protect their trade secrets and confidential information. This often involves the use of non-compete agreements, provisions within employment contracts that essentially require employees refrain from working with competitors for a certain period of time after the end of the present employment relationship. A Massachusetts employer maintained a novel approach to restricting the employment of a former in-house counsel. Instead of asserting the language of a noncompete agreement, the former employer attempted to limit the job opportunities of its former in-house counsel by applying the Massachusetts Rules of Professional Conduct which govern a client-lawyer relationship.
Why not a noncompete challenge?
Non-compete agreements are generally enforced if the length of time and geographic limitations are found to be reasonable. This particular case involved an employment relationship that had ended six years before the dispute arose. As Massachusetts courts generally do not uphold non-compete provisionsthat last longer than two years, the former employer chose a different tactic in an attempt to prohibit the former in-house counsel from working for a competitor — the Rules of Professional Conduct.
What are the Massachusetts Rules of Professional Conduct?
The Massachusetts Rules of Professional Conduct place limitations on the clients a lawyer can represent. Lawyers are not allowed to represent a client when the representation will be materially limited due to the lawyer’s responsibilities to another client or to a third person. There are some exceptions to this Professional Conduct Rule, including:
· The lawyer believes that the representation will not be adversely effected
· The client consents
These matters are even more complex when the issue involves in-house counsel. This case,Gillette Company v. Provost, et al., addressed the issue of whether or not in-house counsel can be barred from offering advice after accepting a position at a competitor.
How did the court rule?
The case was decided in the Business Litigation Session of the Suffolk Superior Court. The opinion focused on the following arguments:
- Inevitable discolosure. One argument was based on the contention that it was inevitable that the defendant would provide confidential trade secrets during his employment with the competitor. This issue is a difficult one, as the appellate courts in Massachusetts have yet to take a definitive stance on the inevitable disclosure argument. In this case, the trial court found that the disclosure was not inevitable and questioned whether or not the employee had the information to disclose in the first place.
- Length of time. The second issue involved the length of time that had elapsed since the lawyer was employed with Gillette. The attorney had been in-house counsel for Gillette from 1991 to 2006. Since leaving the company, he worked for two other companies before taking a position with Gillette’s competitor ShaveLogic. Over six years had passed between his employment with Gillette and the competitor. This is likely the reason the suit was not based on a violation of a non-compete agreement. Generally, non-compete agreements in the state that span over two years do not survive a legal challenge.
- Lack of evidence. It is also important to note that Gillette failed to establish that the defendant had disclosed any confidential information to the competitor.
- Broad injunction. In addition, Gillette’s request was for a rather broad injunction. This injunction included a provision allowing for a ban on any potential future related patent filings. Furthermore, the defendant argued that his contract with ShaveLogic specifically recognizes his "duty to recuse himself from matters that conflict with his obligations to prior employers." This provision, he argues, makes the lawsuit to enforce his ethical responsibilities superfluous.
Ultimately, the court found in favor of the defendant. The attorney was not restricted in his future employment and was not barred from offering advice to the new company. More importantly, the court found that there was no breach of his ethical responsibilities.
Importance of legal counsel
This case provides an example of the many issues that can arise in employer/employee contractual provisions. Therefore, a party entering into an employment relationship or dealing with a dispute regarding a particular provision are wise to seek the legal counsel of an experienced employment lawyer. An experienced attorney will review the details of your unique case and work to protect your legal rights and avoid any potential pitfalls.