If you have a smartphone or most any electronic device, you have likely seen a window containing a long list of terms and conditions appear with an instruction to click “I AGREE” in order to download the necessary software. But how many of you have actually read all of those terms and conditions before clicking to accept?
These electronic interactions can form an enforceable contract, and are commonly referred to as “Clickwrap Agreements.” While Clickwrap Agreements are extremely common for technology downloads, more and more companies are using web-based agreements with their employees as part of the onboarding process for new hires, or during the regular course of employment (e.g., issuing Company Handbooks, updates, or Bonus Offers and Stock Awards). But suppose the Company Clickwrap contains new restrictions for the employees to follow, such as a covenant not to compete or a non-solicitation clause – are these rules enforceable?
Recent U.S. court decisions appear to say YES.
In ADP, LLC v. Lynch (3rd Cir. Feb. 2017), the payroll processing company ADP offered several of their employees an incentive stock award, which was accessible through an ADP-webpage. The webpage stated, “You must select the checkbox to indicate you have read all associated documents before you can proceed,” and provided a checkbox next to the statement, “I have read all the documents below.” Next to the checkbox was a hyperlink to access a PDF document which included (1) a stock award program, (2) stock award agreement, and (3) a non-competition restriction. The employees were offered 90 days to review the terms, and were informed in writing that acceptance of the stock award was conditioned on their agreement to 12-month non-competition and non-solicitation restrictions.
Two employees of ADP later resigned from their jobs, went to work for a competing payroll company, and began soliciting current and prospective customers of ADP. ADP then sued the 2 former employees for improper solicitation and for breaching non-competition restrictions they previously accepted in exchange for incentive stock awards. The former employees argued the clickwrap was invalid and not enforceable, and that ADP had secretly inserted the non-competition restrictions into the stock award programs without providing sufficient notice. The former employees confirmed they did not recall reading the non-competition clause.
The court determined the non-competition and non-solicitation clauses were indeed part of enforceable clickwrap agreements, and the former employees were provided with adequate notice of all relevant terms. The facts in the case also mentioned after the employees clicked the “I have read” box, they also clicked the “Accept Grant” button and then entered their personal passwords. The court determined these affirmative acts were enough to provide reasonable and sufficient notice to the employees.
When they are properly structured, many US courts are inclined to enforce clickwrap agreements in the employment context. If you are interested to use Clickwrap to set terms for employment restrictions, consider the following:
- Provide clear notice, make it prominent to the reader
- Disclose the document contains a non-competition clause or other similar restriction
- Allow employees a reasonable amount of time to consider the offer (24 hours is likely too short, but 30 days would likely be reasonable)
- Require the employee to clearly indicate his/her affirmation by clicking a box labeled, “I have read and agree to accept the terms of [DOCUMENT TITLE],” before the employee can proceed to the next step
- Provide a full electronic copy of the documents to the employee
Going forward, we anticipate more companies will seek to use electronic documents with their workforce, and we expect more terms will be included, such as arbitration agreements, Non-Disclosure Agreement (NDAs), confidentiality restrictions, etc.
This article is intended to provide an overview of practical insights and interesting developments of US legal matters. It is not intended to provide and should not be construed as providing legal advice. Each situation is unique, including the governing local, state or federal law. Please contact an attorney at BridgehouseLaw LLP to address your specific needs or concerns.