Employees at payroll processing giant ADP were held to the terms of a non-compete contained in online stock award documents when they clicked the “I have read and agreed” button in order to receive stock grants. On February 7, 2017, the U.S. Court of Appeals for the Third Circuit, in ADP, LLC v. Lynch, affirmed the district court's decision to partially enforce non-compete agreements against two of ADP's former employees. The Court held that, by clicking a box to accept stock awards that were conditioned on agreement to a non-compete, employees Jordan Lynch and John Halpin were bound to those restrictions.
During their six years of employment, Lynch and Halpin accepted incentive stock awards on five occasions by accessing a company webpage link containing the award documents, which included the award plan, award agreement, and non-compete agreement. Next to the award documents link was a checkbox that required employees to agree to the statement that they had “read all the documents below.” After checking the box, the employees had to enter their personal password and click the “accept grant” button. The award agreement and the non-compete agreement both stated that the award was conditioned on agreement to the non-compete.
When Lynch and Halpin joined a direct competitor, ADP brought suit. The district court enjoined Lynch and Halpin from soliciting current ADP clients for one year, to the extent they gained knowledge of the prospects while employed at ADP. Additionally, in order to reasonably tailor the preliminary injunction under New Jersey law, the district court determined that Lynch and Halpin could continue to work for the competitor. On appeal, Lynch and Halpin argued they had only checked a box confirming that they had read, but not agreed to, the non-compete and each maintained that they did not recall reading the terms of the stock grant award documents before clicking the link affirming that they had read the documents. The Third Circuit rejected this argument and concluded that it is irrelevant whether Lynch and Halpin recalled reading the documents, because the documents explicitly advised of the non-compete, and Lynch and Halpin had checked the box affirming that they read the documents, as well as clicked the “accept grant” button and then entered their personal passwords, thereby binding themselves to the non-compete.
In light of this opinion, employers can form contracts online with employees in certain circumstances. The employer has the burden of demonstrating that the employee received the agreement and acknowledged reading and accepting it, regardless of whether the employee actually read it. While here, this was accomplished through a “click and affirm” box, with the ubiquity of company intranet sites and login credentialing, employers have myriad technological options available for streamlining distribution and acceptance of contracts throughout its workforce, so long as proof of receipt and acknowledgement is saved and can be produced on demand.
