Wisconsin Lawyer: Ethics: No Noncompete Agreements for Lawyers:

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    Ethics: No Noncompete Agreements for Lawyers

    In recognition of the preeminent right of clients to choose which lawyers will represent them, the Rules of Professional Conduct forbid law firms and lawyers from entering into noncompetition agreements.

    Dean R. Dietrich

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    Wisconsin LawyerWisconsin Lawyer
    Vol. 85, No. 4, April 2012

    Question

    I am hiring several new associates for my law firm. I would like to enter into an employment contract that would state that if the associate leaves the firm, the associate would not be able to take any clients with her. Is that allowable under the ethics rules?

    AnswerBall and chain

    A proposed employment contract that would prevent an associate from taking clients with her if she leaves the law firm would not be allowed under the Wisconsin Rules of Professional Conduct. SCR 20:5.6(a) provides that a lawyer may not enter into a contract with another lawyer that prohibits the lawyer from engaging in representation of clients or in any way prevents a client from choosing the lawyer that he or she desires.

    It is generally recognized that a law firm may not enter into a contract with a lawyer that creates a noncompetition prohibition preventing a lawyer from engaging in the practice of law in a location or a region. A lawyer has the right to engage in the practice of law in any location where she is licensed to practice, and a contract cannot prevent the lawyer from engaging in the practice of law if the lawyer is properly licensed.

    Some law firms have tried to limit the right of lawyer-employees to take clients from the law firm on departure from the firm by having lawyers agree that if they stop working for the law firm, they will not contact any clients of the law firm to advise them of the lawyers' departure. This strategy also runs contrary to the requirements in the Rules of Professional Conduct. Each lawyer has a duty, under SCR 20:1.4, to communicate with clients about circumstances relating to the clients' representation by the lawyer. A lawyer leaving a law firm certainly has a duty to communicate with all clients who the lawyer actively represented, to inform them of his or her departure. A prohibition against such communication would be contrary to public policy and a clear violation of the lawyer's communication duties under the Supreme Court Rules.

    In a recent decision, a New York state judge voided portions of a law firm employment contract that discouraged clients from following an attorney to another law office. The provision in the employment contract forbade the departing lawyer from informing clients of his impending departure from the law firm. New York Supreme Court Justice John A. Michalek held that such a contract provision was unenforceable because it violated New York's rules of professional conduct for attorneys. The departing attorney also argued that such a provision caused him harm because he was unable to notify his clients that he was leaving the law firm and the law firm did not communicate with his clients about the lawyer's departure until well after the lawyer had left the firm, thereby eliminating clients' ability to choose to continue to be represented by him. The court held that the provisions of the employment contract prevented clients from making informed decisions because it created a scenario that gave the appearance the departing lawyer had abandoned his clients. The court struck down the illegal provisions in the employment contract and authorized the departing lawyer to communicate directly with each of the clients that he was involved in representing while with the old law firm.

    Dean R. DietrichDean R. Dietrich, Marquette 1977, of Ruder Ware, Wausau, is past chair of the State Bar Professional Ethics Committee. He can be reached at com ddietrich ruderware ruderware ddietrich com.

    Because of the limitations in the Wisconsin Rules of Professional Conduct, a lawyer cannot create an employment contract for an associate that limits the right of the associate to practice in a particular area or limits the right of an associate to have clients continue representation by the associate if he or she departs the law firm. The freedom to practice is a protection afforded to all lawyers on the theory that clients should have the right to choose the lawyer who they wish to have represent them. This long-standing principle has been recognized by the Wisconsin Supreme Court (Sands v. Menard Inc., 2010 WI 96, 328 Wis. 2d 647, 787 N.W. 2d 384). Thus, the employment contract with the associate cannot have those limitations suggested.




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