Can an Illinois corporation ask its in-house lawyer to sign an employment agreement with a non-compete as a condition of employment?

Plain-English summary

A corporation hired an Illinois-licensed lawyer into its in-house legal department, then asked the lawyer to sign an employment agreement containing non-compete provisions. The committee was asked whether one Illinois lawyer at the corporation may ask another to sign such an agreement as a condition of employment.

The opinion concludes the answer is no. Rule 5.6(a) bars a lawyer from participating in offering or making "a partnership, shareholders, operating, employment, or other similar type of agreement that restricts the right of a lawyer to practice after termination of the relationship," with a narrow exception for retirement benefits. The committee notes that in the private-firm setting the Illinois Supreme Court has already treated Rule 5.6's purposes, lawyer autonomy and client choice of counsel, as "important considerations of public policy" and refused to enforce a firm non-compete (Dowd & Dowd v. Gleason).

Although Rule 5.6's application to corporate legal departments had not been decided in Illinois, the committee applies it there for four reasons: the Rules govern all licensed Illinois lawyers regardless of setting (Balla v. Gambro); the Rule targets the restrictive agreement, expressly including "employment" agreements, without regard to practice setting; the Rule's purposes draw no distinction between in-house and private practice; and other jurisdictions overwhelmingly read Rule 5.6 to reach in-house counsel (Ohio Op. 2020-01, Nevada Formal Op. 56, ABA Formal Op. 94-381).

The opinion identifies two limits. Rule 5.6 prohibits only agreements that restrict "the right of a lawyer to practice," so a restriction confined to non-law services (accountancy, engineering, and the like) can be ethically appropriate. The committee also notes that a "savings clause" acknowledging the primacy of the Rules of Professional Conduct generally does not appear contrary to Rule 5.6's purposes, but, not having been presented with the agreement's language, the committee declines to opine on the proper wording or validity of any savings clause in Illinois.

In practice

Under this opinion, an Illinois lawyer who offers or makes an in-house employment agreement that restricts another lawyer's right to practice law after termination, including through a non-compete, is acting improperly under Rule 5.6, and that applies whether the lawyers work in a law firm or a corporate legal department. The committee adds that, apart from any employment agreement, in-house lawyers remain subject to Rule 1.9(c) on using or revealing the employer-client's protected information.

The opinion treats two narrower arrangements differently: a restriction directed only at non-law services, and a non-disclosure or confidentiality term that does not expand confidentiality beyond what the Rules require, can fit within Rule 5.6 as the committee reads it.

Common questions

Q: Can an Illinois company make its in-house counsel sign a non-compete as a condition of the job?

A: No. The opinion concludes that offering or making an employment agreement restricting an in-house lawyer's right to practice law after termination, such as a non-compete, does not comply with Rule 5.6.

Q: Does Rule 5.6 reach in-house counsel, or only private-firm lawyers?

A: It reaches in-house counsel. The committee applies Rule 5.6 in the corporate setting because the Rules govern all Illinois lawyers, the Rule targets the agreement rather than the practice setting, and other jurisdictions read it the same way.

Q: Is any restriction in an in-house employment agreement allowed?

A: Yes, within limits. The opinion says a restriction confined to non-law services (such as accountancy or engineering) can be appropriate, because Rule 5.6 prohibits only restrictions on "the right of a lawyer to practice."

Q: Does a "savings clause" cure a problematic agreement?

A: The committee declined to opine on the proper wording or validity of savings clauses in Illinois because it was not shown the agreement's language, but it noted that a clause affirming the primacy of the Rules of Professional Conduct does not, as a general matter, appear contrary to Rule 5.6's purposes.

Background and rules framework

The opinion interprets Illinois Rule of Professional Conduct 5.6 (Model Rule 5.6), which prohibits a lawyer from participating in offering or making an agreement that restricts a lawyer's right to practice after termination of the relationship (except an agreement concerning retirement benefits) or that makes such a restriction part of the settlement of a client controversy. The committee anchors the Rule's purposes, lawyer autonomy and client choice of counsel, to Comment [1] and to Dowd & Dowd v. Gleason. It also notes the continuing application of Illinois Rule 1.9(c) (Model Rule 1.9(c)) to an in-house lawyer's use of the employer-client's confidential information.

Citations and references

Rules of Professional Conduct:

• Model Rule 5.6 / Illinois Rule 5.6 (restrictions on right to practice)
• Model Rule 1.9(c) / Illinois Rule 1.9(c) (use and disclosure of a former client's information)

Cases:

• Dowd & Dowd v. Gleason, 181 Ill. 2d 460, 481 (1998), Rule 5.6 purposes as public policy; firm non-compete unenforceable
• Balla v. Gambro, Inc., 145 Ill. 2d 492, 502 (1991), in-house counsel must abide by the Rules of Professional Conduct
• Greissman v. Rawlings & Assoc., PLLC, 571 S.W.3d 561, 568 (Ky. 2019), savings clause excluding Rule 5.6 conflicts upheld
• Dish Network Corp. v. Shebar, 2017 Colo. Dist. LEXIS 87 (Colo. Dist. Ct. Denver Cnty. May 9, 2017), outlier enforcing in-house non-compete

Other opinions cited:

• ISBA Advisory Opinion 97-09 (May 1998): firm non-compete
• Ohio Board of Professional Conduct Opinion 2020-01 (Feb. 7, 2020): in-house covenant not to compete
• State Bar of Nevada Formal Opinion No. 56 (Dec. 19, 2019): in-house non-compete violates Rule 5.6
• ABA Formal Opinion 94-381 (May 1994): limits on in-house counsel representation
• New Jersey ACPE Opinion 708 (2006): in-house non-disclosure terms
• Washington State Bar Association Opinion 2100 (2005): in-house non-compete confined to non-law services
• New York State Bar Association Opinion 858 (2011): savings clause affirming the Rules control

See also

• OH BPC Ethics Op. 2020-001: Covenant Not to Compete for In-House Counsel
• NY State Bar Op. 858: Conditioning In-House Employment on Confidentiality
• ABA Formal Op. 06-444: Restrictive Covenants and Retirement Benefits
• ISBA Ethics Op. 17-05: In-House Counsel Representing Multiple Subsidiaries

Source

• Landing page: https://www.isba.org/ethics/opinions/2305