Opinion 2003-9
(September 2003)

Inquirer represents a corporation that asked inquirer to draft an employment agreement (the "Agreement") for the corporation's use with a number of its selected employees. The Agreement includes, among other things, the following provisions:

  1. A non-competition clause
  2. A non-solicitation of customers
  3. A non-solicitation of employees
  4. Non-disclosure of confidential information and trade secrets
  5. A consent to an injunction

One of the corporation's employees is an attorney who serves in a "legal" and "non-legal" capacity. In a "legal" capacity, he tries cases as an in-house attorney. In a "non-legal" capacity, he supervises and manages what would be equivalent to a small branch office that includes a junior lawyer, paralegal, secretary, etc., and he is performing organizational, supervisory, managerial, administrative, and operational tasks similar to a law firm administrator. He also hires a number of outside firms to handle certain litigation matters. In this regard, he knows which firms to hire, which attorneys in the firm are the best, their billing rates and effectiveness, and other information that would not be publicly known to an outsider. He also is familiar with non-legal confidential information regarding the clients of his employer, such as which accounts are the most profitable, which have the best claim/loss ratios, etc.

The corporation wishes to have this employee, in his non-legal capacity, be bound by the same restrictive covenants as other non-legal employees who are being asked to enter into the Agreement. Inquirer has drafted special language to make the Agreement applicable to this employee in his non-legal capacity only. Inquirer seeks an opinion concerning the draft Agreement's adherence to the Pennsylvania Rules of Professional Conduct (the "Rules") as they apply to an attorney who will be asked to execute the Agreement.

Unfortunately, there is very little about the Agreement that is permissible under the Rules, and indeed, it is very likely a violation of the Rules for the inquirer to counsel an attorney to sign the Agreement, or to advise a client to so restrict a lawyer.

Much of what the Agreement designates as non-legal services are indistinguishable from legal services. Rule 5.7, "Responsibilities Regarding Nonlegal Services," provides in relevant part that:

(a) A lawyer who provides non-legal services to a recipient that are not distinct from legal services provided to that recipient is subject to the Rules of Professional Conduct with respect to the provision of both legal and non-legal services.

(b) A lawyer who provides non-legal services to a recipient that are distinct from any legal services provided to the recipient is subject to the Rules of Professional Conduct with respect to the non-legal services if the lawyer knows or reasonably should know that the recipient might believe that the recipient is receiving the protection of a client-lawyer relationship.

It is the opinion of the Committee that the duties described as "non-legal" by the Inquirer are not distinct from legal duties, and indeed, that a lawyer is not permitted to allow a non-lawyer to impose on him a definition of what constitutes legal services. Many lawyers in private practice supervise and manage other lawyers, paralegals and secretaries, as well as perform organizational, supervisory, managerial, administrative, and operational tasks. Lawyers also often retain other law firms (for example, as local counsel or because they have a particular expertise).

Likewise, lawyers in private practice are certainly familiar with non-legal confidential information regarding their clients (the examples given by Inquirer are accounts that are most profitable or have the best claim/loss ratios). Indeed, any concerns Inquirer's client may have about the confidentiality of its information are amply addressed by Rule 1.6, which provides in relevant part that:

(a) A lawyer shall not reveal information relating to representation of a client unless the client consents after consultation, except for disclosures that are impliedly authorized in order to carry out the representation . . .

(d) The duty not to reveal information relating to representation of a client continues after the client-lawyer relationship has terminated.

Because the duties described by the Inquirer are legal duties, the lawyers engaged in those duties are subject to the provisions of the Rules. Therefore, the non-competition clause in the Agreement is prohibited under Rule 5.6, "Restrictions on Right to Practice," which provides that A lawyer shall not participate in offering or making:

(a) a partnership, shareholders, operating, employment or other similar type of agreement that restricts the rights of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement or an agreement of the sale of a law practice consistent with Rule 1.17; or

(b) an agreement in which a restriction on the lawyer's right to practice is part of the settlement of a controversy between private parties.

Similarly, Rule 5.6 would prohibit a lawyer from agreeing to a non-solicitation clause, certainly as it applies to soliciting lawyers, but may even prohibit the lawyer from agreeing not to solicit non-legal personnel as well. If part of the lawyer's new job is to provide his new client with the best "team" of personnel, he cannot agree to restrict his ability to do that.

The clause in the Agreement that prohibits the solicitation of customers is also largely impermissible under Rule 5.6. The non-solicitation of customers clause provides that the lawyer will not "communicate with" or "do business with" or "engage or purchase services or products from" customers of the corporation with whom the lawyer dealt during his tenure at the corporation. Clearly, this would restrict the lawyer's right to practice. Customers of the lawyer's prior employer could become customers of his new employer through no actions of the lawyer himself, and Rule 5.6 prohibits any restrictions on the lawyer's ability to do his job with respect to those customers.

Thus, the only parts of the Agreement that are permissible under the Rules are a very narrowly drafted clause prohibiting the solicitation of customers, and, though duplicative of Rule 1.6, perhaps a clause regarding confidentiality of information. It is the opinion of the Committee that the provision regarding consent to injunction would be unenforceable as to an attorney. Should the inquirer decide to prepare another agreement addressing solicitation of customers and confidentiality that Agreement should include a caveat (similar to paragraph 6(c) in the draft Agreement) stating that nothing in the Agreement shall be inconsistent with any provisions of the Rules, and that if the Rules are deemed to prohibit any portion of the Agreement, the applicable provision of the Rules shall prevail.

Because most of the provisions of the Agreement are prohibited by the Rules, it would be a violation of the Rules for an attorney to advise a client to ask a lawyer to execute the Agreement. Rule 8.4(a) provides that it is professional misconduct for a lawyer to "violate or attempt to violate the rules of professional conduct, knowingly assist or induce another to do so, or do so through the acts of another."

The Philadelphia Bar Association's Professional Guidance Committee provides, upon request, advice for lawyers facing or anticipating facing ethical dilemmas. Advice is based on the consideration of the facts of the particular inquirer's situation and the Rules of Professional Conduct as promulgated by the Supreme Court of Pennsylvania. The Committee's opinions are advisory only and are based upon the facts set forth. The opinions are not binding upon the Disciplinary Board of the Supreme Court of Pennsylvania or any other Court. They carry only such weight as an appropriate reviewing authority may choose to give it.