HR Legalist

Employees Bound by Non-Compete Agreement When They Clicked “Accept” to a Bonus on Intranet

Two employees who clicked “accept” on an online form in order to receive a bonus were bound by additional language that included an agreement to not compete in the future.  Messrs. Lynch and Halpin worked in sales for ADP, and every year to collect their annual bonuses, they had to “accept” a non-compete agreement through a “clickwrap” button on an internal company webpage. They claimed, however, to be unaware that by accepting the bonus they were also consenting to a non-compete agreement. In ADP, LLC v. Lynch and Halpin, No. 16-3617 (3d Cir. Feb. 7, 2017) (slip op.), the United States Court of Appeals for the Third Circuit affirmed the grant of a preliminary injunction by the United States District Court for the District of New Jersey in favor of employer ADP against former employees Lynch and Halpin.

We have all undoubtedly accepted “clickwrap” agreements on the internet—the user clicks a button or checks a box indicating that they accept the terms of an agreement in order to complete a transaction online. Here, however, the employees claimed that certain defects in the way the non-compete agreement was presented by ADP’s internal website caused them to be unaware that they were consenting to a non-compete agreement. Specifically, they checked a box acknowledging that they “read” the documents and a clicked a button accepting the bonuses. The webpage did not mention that the documents included a non-compete agreement or require the user to open or read the documents. Meanwhile, had they actually opened the documents, the non-compete agreements were buried on page 19.

While it is well-established that clickwrap agreements are generally enforceable, this appears to be a case of first impression for a non-compete agreement executed via a clickwrap.

Takeaway for employers:

ADP’s victory does not change the fact that it engaged in an ill-advised practice. Generally, employers should make sure that non-competes are presented in a conspicuous way such that employees know what they are agreeing to. A simple statement such as: “Clicking on the ‘accept’ button signifies your acceptance of the terms of the agreement, including non-competition restrictions.”  Not only does this increase the likelihood that the agreement will be enforced, but it also increases compliance and reduces the need for costly litigation. Also, employers should be aware that this was a fact based, non-precedential ruling, and does not guarantee that every inconspicuous, clickwrap non-compete agreement will be enforced in the future.