Non-compete agreements are banned in California, but still show up in many employment contracts for workers in the Golden State.
A group based at the University of San Diego School of Law wants the State Bar of California to examine whether attorneys who help clients craft employment agreements with “unambiguously illegal or unenforceable” language are violating ethics rules.
In a letter submitted Wednesday, the Center for Public Interest Law requested that the bar’s Committee on Professional Responsibility and Conduct, known as COPRAC, issue a formal ethics opinion about the topic. The group’s submission comes at a time in which the use of non-compete agreements is under close scrutiny nationally.
The center’s letter says including a non-compete clause in an employment contract could deceive a California employee into thinking the language is enforceable in court, prompting them to change their behavior.
“For example, an employee working in poor working conditions might feel unable to look for different work elsewhere if she is covered by an unenforceable non-compete agreement,” the letter states.
The center claims such concerns are not just theoretical. It cites academic research indicating that 19 percent of employees in California are subject to non-compete clauses, roughly the same percentage as workers in states where such contract provisions are permissible.
The Center for Public Interest Law also wants the State Bar committee to examine the propriety of attorneys assisting employers with the drafting or reviewing of arbitration clauses with unenforceable terms, such as requiring that arbitration must occur in an out-of-state forum or allowing for the employer to unilaterally select the arbitrator.
“A lawyer advising a client to adopt an illegal or unenforceable term, who knows or should have known about its unenforceability, would seem to be in violation of Rule 8.4(c) prohibiting conduct involving dishonesty, deception, and fraud,” the letter states.
The center argues that a lawyer engaging in such activity would also seem to violate Rule 1.2.1, which prohibits counseling a client to engage in conduct that the lawyer knows is fraudulent or a violation of law. The group backs up this claim by noting it is a violation of California’s Labor Code to “require any employee or applicant for employment to agree, in writing, to any term or condition which is known . . . to be prohibited by law.”
The Center for Public Interest Law’s letter was signed by Executive Director Robert C. Fellmeth and Administrative Director Bridget Gramme.
Gramme said while reading between the lines of the Rules of Professional Conduct would suggest attorneys who help clients insert unenforceable terms into employment contracts are violating ethics rules, the center thought an explicit opinion from the bar would be helpful.
“I would think in the interest of consumer protection they would lean the way we are asking them to,” she said.
The bar’s Committee on Professional Responsibility and Conduct drafts advisory ethics opinions based on questions submitted to the committee or developed by the panel on its own initiative.
While the committee’s opinions are not binding, they are frequently cited in the decisions of the California Supreme Court, the State Bar Court Review Department, and California courts of appeal.
Jane Flanagan, a visiting scholar at Chicago-Kent College of Law, expressed support for the Center for Public Interest Law’s close examination of attorneys’ ethical duties in drafting non-compete agreements.
While serving as the Workplace Rights Bureau Chief at the Illinois Attorney General’s Office, Flanagan helped the AG’s office file lawsuits and investigate companies for the overuse of non-compete agreements. She said she has seen companies using identical contract terms, including non-compete clauses, for all employees.
“I would like to see attorneys, as they are thinking about and drafting employment agreements, asking of their employer clients, ‘For whom do you really need what provisions?’, as opposed to using the same boilerplate language for all employees that may have the ancillary effects of keeping employees tied to a job based on an unenforceable term,” Flanagan said.
She also highlighted that employment contracts are an area where there is typically an attorney on one side drafting a contract for the employer, while the average employee doesn’t have a lawyer assisting them.
“There is sort of a special responsibility there for the drafter not to write a contract that is illegal or unenforceable,” Flanagan said.
Gramme agreed, saying an overriding goal of her center’s efforts in the realm of employment contracts is to address “the imbalance of power” between employers and employees.