Opinion 2118

QUESTION PRESENTED

The inquiring lawyer, a junior lawyer at a law firm, entered into an employment agreement with the firm that contains three non-compete provisions. He seeks the Committee’s opinion on whether the three provisions violate RPC 5.6(a), which generally prohibits such provisions.

The three provisions in the lawyer’s employment agreement read, in relevant part:

“9. Business of the Firm. It is understood and agreed that Attorney will refrain from taking any and all actions that may interfere with the business or client relations of the Firm. For that reason, Attorney shall contact and/or communicate with clients of the Firm only with the approval of the Firm, both during or after the term of this Agreement.”

“16. Non-Compete. After termination of the term of this Agreement, Attorney agrees to refrain from contacting any clients or potential clients of the Firm for a period of two years from the date on which termination is effective. Attorney shall not solicit clients or potential clients of the Firm, or attempt to compete with the Firm in any way, for a period of two years from the date on which termination is effective. It is understood that the geographic scope of this non-compete clause includes Arizona, New Mexico, the District of Columbia, Washington State, Wyoming, and all Indian reservations in which the Firm either represents client(s) or has represented client(s) within the past three years prior to the date of this Agreement. The parties agree that the scope and duration of this non-compete is reasonable.”

“29G. Liquidated Damages. * * * In the event that Attorney breaches the non-competition provisions of this Agreement, then Attorney shall pay the firm a liquidated damages amount of $25,000 per breach, and shall be subject to judicial injunctive relief to prevent further breach.”

RESPONSE

As you requested, the Committee reviewed Paragraphs 9, 16 and 29G of your employment agreement with your law firm. The Committee finds that the non-compete provisions in those paragraphs violate RPC 5.6(a).

RPC 5.6(a) reads:

“RESTRICTIONS ON RIGHT TO PRACTICE

“A lawyer shall not participate in offering or making:

“(a) A partnership or employment agreement that restricts the rights of
a lawyer to practice after termination of the relationship, except an
agreement concerning benefits upon retirement;”

A number of WSBA informal ethics opinions have examined non-compete restrictions in employment agreements, including at least some that contained related liquidated damages provisions. See, e.g., WSBA Informal Ethics Opinions 2100 (2005), 1998 (2002), 1953 (2001), 1446 (1991), 1384 (1990) and 927 (1985). Although they have declined to comment on the enforceability of such provisions as a matter of substantive law beyond the RPCs, they generally conclude that such provisions in employment agreements violate RPC 5.6(a). See generally WSBA Legal Ethics Deskbook §6.3(4)(c) at 6-14 (2003).

RPC 5.6(a) is patterned on the analogous provision of the ABA Model Rules of Professional Conduct. Comment 1 to ABA Model Rule 5.6(a) outlines its rationale:

“An agreement restricting the right of lawyers to practice after leaving a firm not only limits their professional autonomy but also limits the freedom of clients to choose a lawyer. Paragraph (a) prohibits such agreements except for restrictions incident to provisions concerning retirement benefits for service with the firm.” Accord ABA Formal Ethics Opinion 94-381at 2-3 (1994) (discussing ABA Model Rule 5.6(a)).

The non-compete provisions here fall squarely within RPC 5.6(a)’s prohibition.

Under the Committee’s rules of procedure, it does not issue opinions on matters of substantive law beyond the RPCs. Therefore, this opinion does not extend to the enforceability of the provisions concerned as a matter of substantive law beyond the RPCs. Further, this opinion is limited to the three provisions you raised and does not express an opinion on any other provisions of your employment agreement with your law firm.