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Non-competition agreements for in-house counsel
December 19, 2005 by Ross Runkel at LawMemo
Employees often agree that they won't compete with the employer after the termination of employment. But is this ethical for lawyers? Specifically, for in-house counsel?
According to an article in today's New Jersey Law Journal, the New Jersey Supreme Court's Advisory Committee on Professional Ethics is investigating whether it is ethical for lawyers employed by BASF Corporation to sign a non-competition agreement that the company requires of all employees.
The answer is, of course, a no-brainer. It is unethical under the provisions of the code of ethics that has been adopted in practically every state.
Rule of Professional Conduct 5.6:
"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."
There is always room for debate about what the law should be in this area. Employees in other professions can ethically make such agreements, and lawyers seem to be in a class by themselves.
But there can be no legitimate debate that Rule 5.6 forbids lawyers to make such agreements.
So, according to the article, BASF has backed off pending the investigation.
I suppose the next step will be an attempt to change the law for in-house counsel. It might also be time for the ethical experts to re-examine whether it really makes sense as a general matter for lawyers to be absolutely barred from agreeing not to compete against their former employers and partners.
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Physicians' non-compete clause OK in New Jersey
April 05, 2005 by Ross Runkel at LawMemo
Although lawyers' non-compete agreements are per se unreasonable and unenforceable, the same arrangements for physicians are OK. "Disfavored," said the New Jersey top court, but still enforceable.
The Community Hospital Group v. More (New Jersey 04/05/2005).
The court applied a fairly typical analysis to the reasonableness of the restrictive covenants, but with a heavy reliance on protecting the public interest.
The court found that it was reasonable for the covenant to prohibit the practice of neurosurgery for a period of two years. However, the court wanted the geographic area narrowed to no more than 13 miles. Most notably, the court found that there was a shortage of neurosurgeons in one emergency room, so in order to protect the public's interest the covenant could not include that emergency room.
My view: Nice job of balancing interests. Poor job of explaining why such restrictions are per se illegal for lawyers and not for physicians.
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Editor: Ross Runkel, Professor of Law Emeritus. email Ross@LawMemo.Com, Phone 503-399-8028. Copyright LawMemo, Inc.
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