Employment Law Update: Court Holds Internet-Based Noncompetition Agreement Enforceable

Imagine this scenario: you’re excited about your new job with a large payroll processing company, and as a part of the employment offer, you’re directed to a company website that contains the terms of a stock award program. You quickly skim through it, check the box indicating that you’ve read and accept the terms, and click submit. As you skimmed through it though, you missed that the terms included a non-solicitation clause that restricts you from soliciting clients and prospective clients for one year after you leave the company.

Are you bound by that non-solicitation clause buried in the terms of the stock award program?   

In ADP v. Lynch, the answer is yes, according to the United States Court of Appeals for the Third Circuit. In an opinion issued last week, the Third Circuit Court of Appeals, which covers Pennsylvania, New Jersey and Delaware, held that two sales representatives that followed those steps in signing up for ADP’s stock award program, are restricted by the terms of the non-solicitation clause.

The terms of the stock award program specifically stated that the clause was a condition of accepting the award, and the employees entered their personal passwords and checked two boxes – one which stated “you must select the checkbox to indicate you have read all associated documents before you can proceed” and “accept grant.” On that basis, the court held that not only did they indicate that they had read the terms, but that they had agreed to be bound by them. The court explained that the employees’ argument that they did not recall reading the documents was irrelevant.

Moral of the story – it is important to carefully read all documents you receive when entering into a new employment relationship, even if they are presented to you on a website or in any other medium. If you have questions about the legal effect of a particular clause or agreement, you should consider hiring an attorney with employment law experience before signing, checking a box, or entering your password.

Matt Landis is an attorney at Russell, Krafft & Gruber, LLP, in Lancaster, Pennsylvania. He received his law degree from Widener University and works regularly with employers and employees to avoid and resolve employment issues, including review and negotiation of employment agreements and restrictive covenants.