March 24, 2020 4 minutes to read · 1000 words

Firms May Force Lawyers to Sign Non-Solicitation Contracts

By Onika K. Williams

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Reprinted with permission from Litigation News, Winter 2020, Volume 45, Number 2, at 6. ©2020 by the American Bar Association. All rights reserved. This information or any or portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

A firm can fire a lawyer who is an at-will employee and who refuses to sign an agreement for non-solicitation of the firm’s current or potential customers. According to the Supreme Court of Kentucky, a non-solicitation agreement that makes an exception for legal work does not violate Kentucky Supreme Court Rule 3.130 (Rule of Professional Conduct 5.6), which prohibits a lawyer from agreeing to restrict her practice following cessation of employment, with certain exceptions.

Employee’s Concerns About Potential Ethics Violation Leads to Her Termination

The conflict in Greissman v. Rawlings and Associates, PLLC began when Rawlings and Associates, a law firm that practices healthcare subrogation, terminated one of its licensed attorneys who worked as a subrogation analyst. Before dismissing the attorney, the law firm presented her with an agreement that included a provision not to “solicit, contact, interfere with, or attempt to divert” any of the law firm’s current or potential clients for three years after ceasing employment. The firm typically presented a similar agreement to attorneys and non-attorneys at the time of termination. The attorney and non-attorney versions of the agreement used the same language, except the attorney agreement included a savings clause that said: “except to the extent necessary to comply with the rules of professional responsibility applicable to attorneys.”

After consulting with her personal lawyer, the attorney refused to sign the attorney version of the agreement because she believed the non-solicitation provision violated Rule of Professional Conduct 5.6. That rule states that “a lawyer shall not participate in offering or making a partnership or, shareholders, operating, employment, or other similar type of agreement that restricts the right of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement.” After the attorney refused to sign the agreement, the law firm terminated her.

Under Kentucky law, an employer can fire an at-will employee “for good cause, for no cause, or for a cause that some may view as morally indefensible” as long as the employee is not terminated for an unlawful reason that violates statutory or constitutional provisions. However, an employee can establish a claim of wrongful termination if the employee can show that the firing was contrary to public policy based upon a constitutional or statutory provision, or that the termination was a direct result of the employee’s refusal to violate the law during the course of employment.   

Agreement’s Savings Clause Keeps Possible Ethics Violation at Bay

After her dismissal, the attorney filed suit alleging that she had been wrongfully terminated in violation of public policy. The law firm filed a motion to dismiss on the grounds that Rule 5.6 was not a public policy and that, therefore, the attorney’s complaint failed to state a claim upon which relief could be granted. The circuit court denied the law firm’s motion to dismiss and concluded that the attorney’s case could proceed because a rule of professional conduct, which the Kentucky Supreme Court established, falls within the public policy exception. Subsequently, the parties filed cross-summary judgment motions. The circuit court ruled that the attorney’s claim was cognizable but now dismissed her complaint, concluding that the agreement did not violate the Rules of Professional Conduct since the savings clause would have protected the attorney from any violation if she had signed it.

The attorney appealed. The Kentucky Court of Appeals upheld the circuit court’s decision to dismiss the attorney’s complaint but concluded that the circuit court should have granted the law firm’s motion to dismiss because Rule 5.6 did not provide the public policy to support the attorney’s wrongful termination claim. The attorney petitioned the Supreme Court of Kentucky for review.

Kentucky’s highest court held that the court of appeals erred in holding that the attorney’s complaint should have been dismissed for failure to state a claim but affirmed the dismissal on other grounds. The court explained that Section 116 of the Kentucky Constitution vests the Kentucky Supreme Court with the exclusive rulemaking power over attorney discipline and that the Rules of Professional Conduct qualify as public policy for purposes of a wrongful discharge claim. However, the court concluded that the attorney had failed to establish a genuine issue of material fact about her reasonable belief that signing the agreement would result in a rule violation because the plain language of the agreement’s savings clause was unambiguous and excluded any interpretation of the agreement conflicting with ethics rules.

Uncertainty about Rule 5.6 Yields Caution

ABA Section of Litigation leaders caution that the Greissman opinion highlights the importance of lawyers understanding the implications of non-solicitation agreements. The purpose of these agreements is to protect “confidential information about clients, trade secrets, and other proprietary information,” explains Janice V. Arellano, Bridgewater, NJ, cochair of the Section of Litigation’s Minority Trial Lawyer Committee. However, “it is generally understood that noncompete provisions for attorneys in private law firms conflict with ABA Model Rule of Professional Conduct 5.6 and many state corollaries,” states David E. Gevertz, Atlanta, GA, cochair of the Section’s Employment & Labor Relations Committee.

Because Model Rule 5.6 prohibits restrictions on the right of the lawyer to practice, the rule can “cause concern for lawyers who sign restrictive covenants that may, in reality, be unenforceable and burdensome to the practitioner and their livelihood,” Arellano says. Practitioners that are “presented with such provisions should be extremely cautious about signing them, as doing so may expose all lawyer signatories to charges that they have violated their state’s ethics rules,” advises Gevertz.

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Onika K. Williams is an associate editor for Litigation News.

Originally published in Litigation News, Winter 2020, Volume 45, Number 2, at 6; reprinted in GPSolo eReport, Volume 9, Number 8, March 2020. © 2020 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, or the Solo, Small Firm and General Practice Division.