When It’s Time To Go And You Have A Non-Compete Clause

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It is to be expected that after years of providing legal services, companies, law firms, and specifically the attorneys that work on their cases build a relationship. The level of closeness between the organization, firm and attorney is part of the natural symbiosis of mutual growth through the problems, cases, and claims that they’ve fought against. It is also quite normal that CEO’s and leading attorneys to meet on informal occasions, like holidays and social events. Some may say that after years of working hand in hand they have become friends. The problem with this situation is that the relationship is built with the leading attorney in charge of the entire legal needs of the company and not with the firm. The moment the contract of this lawyer is terminated, or they decide to go to another firm or create their own, the relationship is in jeopardy.

Client-Firm or Client-Attorney Loyalty?

Loyalty and client retention depends strictly on the lawyers who are in constant communication with clients. Clients are loyal to their lawyers, not to the firm that these lawyers represent. Law firms know this and it is why the vast majority of employment contracts between attorneys and firms include bulletproof clauses on the matter.

The Non-Compete Clause

Non-compete covenants or non-solicitation clauses are written in a way that there is little to no space to maneuver. The main purpose and the extent of these clauses are to prevent lawyers from actively engaging firm clients and convincing them to drop the firm and sign with their new firm. The reality is (and has always been) that clients have the right to choose whether or not to continue business relations with the current firm or to engage the former attorney at the new firm.

Non Compete Clause

Regardless of the jurisdiction, most non-compete clauses are the same: they forbid departing lawyers from reaching out to clients and offer their services for the purpose of allowing the firm the opportunity to keep their client since it often likely the client will follow the attorney to their new firm. However, the clause is meant to limit the communication to a mere notification of service termination. The outcomes of violating such prohibition are mostly fines but these clauses are only partially enforceable.

Drafting A Non-Compete Contract Clause

In order to properly draft, read and interpret the content of non-compete/non-solicitation clauses, several requirements must be fulfilled.

  • First, the clause should not impede the departing attorney from practicing law in the same country or province. Any clause that declares the lawyer should pursue another career when leaving the firm is a complete lie.
  • Second, a limited time frame. Non-compete clauses cannot last forever, or 25 years. They are designed to protect the firm from a massive loss of clients when senior partners and/or associates leave so they must be drafted with realistic terms.
  • Third, and most importantly, contract and by extension, non-compete clauses are signed between the firm and the attorney. They do not affect the client. The client is free to terminate services with any firm, move to a new firm, or follow a particular associate/partner. Any clause that refers to the client is considered a simple threat and hard to be sustained as an argument in court.

Non-compete clauses are drafted, in most cases, for a certain jurisdiction. In the event that the client- company has a multinational presence, and the departing lawyer moves to another country or laterals to an international law firm, the content, and prohibitions included in the contract, may not be enforceable. In any case, it is very important that both firms and lawyers know the conditions, liabilities, and obligations of the contract termination beforehand.

In conclusion, non-compete/non-circumvention/non-solicitation clauses are wildly popular nowadays. They can be found in numerous industries including construction, marketing, accounting, technology, etc. They have become standard with service provision companies. And though you may be a lawyer, it cannot be assumed that you have read every line of your contract and the extension of the clauses. Reading and fully understanding your contract allows you to know your options, and to avoid costly penalties of a license suspension as the result of lateraling to a different firm or opening your own legal practice. Subscribe to the Leopard Blog for discussions on law firm insights, diversity, law firm insights, and other relevant topics.

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