A federal district court in New Jersey recently denied two employees' motion for reconsideration of its prior order enforcing a 'clickwrap' agreement containing restrictive covenants and a forum selection clause.(1)
The employees' former employer, ADP, sued the employees after they had accepted positions with a competitor, The Ultimate Software Group, Inc. ADP alleged that the employees had agreed to several restrictive covenants, including non-solicitation, non-compete and non-disclosure agreements, as well as a forum selection clause, as a condition of their participation in ADP's stock award programme.
Specifically, the employees had accepted their stock awards using an electronic program that required the employees first to check a box acknowledging that they had read several accompanying electronic documents that contained the restrictive covenants and forum selection clause. Like many consumer clickwrap agreements, the employees were not actually forced to read the documents. Moreover, the employees did not affirmatively agree to the terms of the documents; they just acknowledged that they had read them.
The court found that the clickwrap agreement was enforceable on these facts. The court thus denied the employees' motion to dismiss, finding that the court had personal jurisdiction on the basis of the forum selection clauses, and granted in part ADP's motion for a preliminary injunction restricting the employees' work with Ultimate Software on the basis of the restrictive covenants.
ADP demonstrates that courts may uphold the use of clickwrap agreements, which are relatively common in consumer markets, in the context of employment agreements. It remains to be seen whether courts will reach the same conclusion with a clickwrap agreement which does not provide the clicking employee with significant employee benefits, such as the stock awards in ADP. While pen and ink agreements (including electronic signature options) will likely remain the better choice for full employment agreements, employers may consider the use of electronic agreements for regular policies which require acknowledgement from a broad selection of employees and that might require frequent revision, such as an employee handbook.
For further information on this topic please contact or Lori Zahalka or Grant T Miller at Mayer Brown LLP by telephone (+1 213 229 9500) or email ([email protected] or [email protected]). The Mayer Brown website can be accessed at www.mayerbrown.com.
(1) ADP LLC v Lynch, No 2, 2016 cv 01053 (DNJ 2016).