Accepting Non-Compete Agreements Online – The New Norm?

An increasing number of companies are asking their employees to fill out and accept employment paperwork online through portals set up by employers precisely for that purpose.  Such employment paperwork often includes non-compete agreements presented either as stand-alone documents or as clauses included in larger contracts, such as documents awarding restricted stock units (RSUs) or non-disclosure agreements.

Recently, a Texas employee attempted to challenge the enforcement of his non-compete agreement in an injunction proceeding claiming that he did not remember signing a non-compete agreement presented to him online and arguing that the employer failed to present any evidence that he had signed the agreement.

A Texas federal district court rejected the employee’s arguments finding that the employer presented sufficient evidence to show that the employee accepted the terms of the non-compete agreement online when he accepted the associated restricted stock units awarded to him by the company.

Specifically, the employer presented the following evidence showing that the employee knowingly accepted the terms of the non-compete agreement included in his restricted stock units plan:

  1. The Employee received a letter awarding the restricted stock units to him.
  2. Before the employee could accept the award, the letter instructed the employee to log into a website and click a box acknowledging he read the confidentiality and non-compete agreement.
  3. Employee had to create unique login credentials to access and accept the documents.
  4. Employee accepted the restricted stock units.

The court proceeded to explain that:

Here, [the employee] was required to login using credential personal to him and accept the RSU Awards by acknowledging and agreeing—evidenced by clicking a box—that he would be bound by the covenant not to compete, solicit, or interfere set forth therein. [The employee’s] argument that he does not recall seeing the non-compete and non-solicitation provision is not compelling under Texas—or a general understanding of—contract law.

BOTTOM LINE:  Employers who present employees with agreements that must be reviewed and signed online should make sure they have a way of proving that the employee signed the agreement, either by showing that the employee had to take certain steps to access the paperwork or by having a system that logs employees’ activities in the portal or both.

Employees should carefully read everything that they sign regardless of whether it is presented in a paper or electronic format.

Leiza Dolghih is a partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice.  Her practice includes commercial, intellectual property and employment litigation.  You can contact her directly at Leiza.Dolghih@LewisBrisbois.com  or (214) 722-7108.

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