Ethics Opinion

Opinion 93-4

FLORIDA BAR ETHICS OPINION
OPINION 93-4
February 17, 1995
Advisory ethics opinions are not binding.
Certain provisions in a law firm-associate employment agreement violate Rule 4-5.6(a),
which prohibits a lawyer from offering or making a partnership or employment
agreement that restricts a lawyer’s right to practice after termination of the relationship.
The offending provisions create a substantial financial disincentive that would preclude
the departing associate from accepting representation of firm clients, and impermissibly
restricts the right of association among lawyers.
Note: This opinion was approved by the Board of Governors at it February 1995
meeting.
RPC:
Opinions:
Cases:

4-1.4, 4-1.5(g), 4-5.6(a)
66-44, 69-1, 71-62, 84-1; ABA Informal Opinion 1417; Texas Opinion
459
Rosenberg v. Levin, 409 So.2d 1016 (Fla. 1982); Dwyer v. Jung, 336 A.2d
498 (N.J.Super. 1975); Cohen v. Graham, 722 P.2d 1388 (Wash.App.
1986)

The inquiring attorney, employed by a law firm as an associate, has been asked by
the firm to sign an employment agreement containing the following provisions:
A. Employee acknowledges that the Employer has invested its trust and
confidence in the Employee and a considerable amount of time and money
in training and developing the skills and expertise of the Employee in the
practice of law. As a condition of employment and the benefits thereof,
Employee agrees that in the event Employee’s Employment Agreement
with the Employer is terminated, Employee will not, for a period two (2)
years from date of termination, interfere with the business of the Employer
by:
1. seeking, directly or indirectly, any of the Employer’s clients; or
2. inducing, either directly or indirectly, any employee to quit or
abandon the Employer.
B. Employee acknowledges that the above prohibitions are reasonable
and necessary covenants not to interfere with the business of the
Employer. In the event of a breach of any of these covenants by the
Employee or in the event Employee accepts representation of a client of
the Employer, it is agreed as follows:

1. Employee acknowledges that he (she) would work on any on-going
case or on-going file matters for such client on behalf of and in the interest
of the Employer and shall compensate to the Employer the greater of fifty
percent (50%) of any fee received from said client or the Firm’s quantum
meruit.
2. As to subparagraph A.2. the Employer’s damages are not readily
calculable and that Employer is entitled to injunctive relief to enforce said
covenants, there being no adequate remedy at law.
The associate is declining to sign the agreement, asserting that doing so would be
contrary to Rules 4-1.4, 4-1.5(g), and 4-5.6(a) of the Rules of Professional Conduct of
The Florida Bar. There being no direct authority in Florida on the ethics issues raised by
this inquiry, the attorney asks for guidance from this Committee.
Rule 4-5.6 provides, in relevant part:
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[.]
The prohibition contained in Rule 4-5.6 seeks to protect the professional
autonomy of lawyers as well as clients’ access to the lawyer of their choosing.
Comment, Rule 4-5.6. As this state’s highest court has noted: The “special trust and
confidence” inherent in an attorney-client relationship dictates “that clients be given
greater freedom to change legal representatives than might be tolerated in other
employment relationships.” Rosenberg v. Levin, 409 So. 2d 1016, 1021 (Fla. 1982).
Thus, termination agreements among lawyers are scrutinized more closely than restrictive
covenants found in traditional commercial settings. Dwyer v. Jung, 336 A. 2d 498, 500
(N.J. Super.Ct.Ch.Div. 1975).
On their face, the contract provisions in question do not expressly prohibit a
lawyer who leaves the firm from thereafter representing “firm clients.” Because the
provisions mandate that payments be made from the departing attorney to the firm,
however, the question becomes whether the contract creates a “financial disincentive”
that in fact operates to preclude the departing attorney from accepting representation of
such clients.
In varying contexts, courts and ethics committees from other jurisdictions have
considered whether certain financial disincentive provisions in law firm partnership or
employment agreements act as impermissible restrictions on an attorney’s right to
practice after termination of the partnership or employment relationship. In Opinion 459,
for example, the Texas State Bar Professional Ethics Committee was faced with an
inquiry substantially similar to the one presented here. For the same reasons given by the
Texas Bar in disapproving the associate employment agreement at issue there, we find
section (B)(1) of the employment contract in the instant inquiry ethically impermissible:

The interjection of a fee to a third party obviously impairs the creation of a
lawyer-client relationship between the departing lawyer and clients of his former firm....
The lawyer may be unwilling to work at substantially reduced rates for even his best
clients, and pressure against acceptance in favor of clients paying full value to the firm
would rise within the new employer. The attorney would thus be compelled to decline
employment and the client would be deprived of the attorney of his choice.
In reaching our conclusion, we do not suggest that every termination
compensation clause in an employment agreement violates Rule 4-5.6(a). See Florida
Ethics Opinion 84-1, as modified [withdrawn]. In fact, when appropriately drawn, such
clauses “offer an orderly and practical transition for the dissolution of law practices.”
Cohen v. Graham, 722 P. 2d 1388, 1391 (Wash. Ct. App. 1986). Thus, a compensation
provision that is specifically designed to avoid time-consuming, quantum meruit analyses
may be contrasted with an essentially punitive clause intended to restrict competition. In
our estimation the agreement presented here falls into the latter category because, by way
of example, the firm would be entitled to 50% of any fee ultimately received by the
departing associate from a client who came to the firm the day before the associate
terminated employment. While perhaps less egregious, other examples of the restrictive
nature of the termination clause could easily be imagined.
Similar concerns arise with respect to section (A)(2) of the employment
agreement, at least as it applies to lawyers of the firm. By prohibiting a departing
attorney from attempting to hire other lawyers from the firm, the agreement restricts the
right of association between attorneys and, indirectly, the right to practice. ABA
Informal Opinion 1417. In our opinion, therefore, this provision also violates Rule 45.6(a) as it pertains to attorneys of the firm.
We also agree with the inquirer that Rule 4-1.4 of the Rules of Professional
Conduct is implicated here. That rule provides:
(a) Informing Client of Status of Representation. A lawyer shall keep
a client reasonably informed about the status of a matter and promptly
comply with reasonable requests for information.
(b) Duty to Explain Matters to Client. A lawyer shall explain a matter
to the extent reasonably necessary to permit the client to make informed
decisions regarding the representation.
The duty to provide clients with information relevant to their case would
ostensibly include the fact that the attorney is leaving the firm. See Florida Ethics
Opinions 66-44 [withdrawn]; 69-1; 71-62; 84-1 [withdrawn]. The employment
agreement in question prohibits a departing employee from “seeking, directly or
indirectly, any of the Employer’s clients.” To the extent that the prohibition on “indirect”
solicitation could be read to limit an attorney’s duty, imposed by the above rule, to notify
clients of the attorney’s departure from the firm, it does not comport with the Rules of
Professional Conduct.

Because we have found the employment agreement to be an impermissible
restriction on an attorney’s right to practice in violation of Rule 4-5.6(a), we need not
address whether the agreement also violates Rule 4-1.5(g), the fee division rule.