Robert Half Can't Stop Former Employees From Telling The World Where They Used To Work (Forbes Cross-Post)

Robert Half Can’t Stop Former Employees From Telling The World Where They Used To Work (Forbes Cross-Post)

As the saying goes, a business’ most important asset is its people. That maxim applies with extra force in the staffing industry, where people literally are its business. Perhaps that explains why Robert Half, a leading staffing company, uses an unusually aggressive contract clause to hamper departed employees. A recent federal court decision rejected the overreaching contract clause, but the court ruling highlights the regulatory challenges to preserving employee mobility.

The Ruling

Paragraph 13 of Robert Half’s contract with its employees says:

After termination of Employee’s employment with Employer, Employee shall not indicate on any stationary, business card, advertising, solicitation or other business materials that Employee is or was formerly an employee of Employer, any of its divisions, or any of the RHI Companies except in the bona fide submission of resumes and the filling out of applications in the course of seeking employment.

I don’t believe this clause is typical for employment contracts. I didn’t find similar clauses either in Westlaw’s database of litigated cases or Google searches.

There’s a good reason paragraph 13 isn’t common. Read literally, it seems to say that departed Robert Half employees can’t tell prospective customers that they used to work for Robert Half. For example, this clause apparently applies to a former employee’s LinkedIn profile and biography posted to a new employer’s website. So what could the former Robert Half employee say about his or her work history? Maybe: “I worked at a leading staffing company for X years”? That’s more mysterious than enlightening.

Why did Robert Half include paragraph 13 in the first place? It isn’t concerns about Robert Half’s brand. Robert Half can clearly prevent former employees from misrepresenting that they are still affiliated with Robert Half without addressing the issue in its contract. At the same time, trademark law should let former employees enumerate former employers in their biographies; such listings wouldn’t confuse consumers, plus it would be covered by trademark’s “nominative use” defense. (see, e.g., Playboy v. Terri Welles).

Instead, Paragraph 13 seeks to hinder former Robert Half employees from truthfully marketing their expertise. Indeed, Robert Half freely admitted it wanted to prevent former employees from “using RHI’s own name and brand to compete with RHI” (emphasis added). However, California law (Business & Professions Code 16600) voids almost all non-compete restrictions. The court easily sees how Paragraph 13 conflicts with the statute:

Paragraph Thirteen of the employment agreements, by its terms, places some restriction on Defendants’ practicing their profession after terminating employment with RHI.

The court thus strikes all of Robert Half’s legal claims predicated on paragraph 13. Indeed, given its obvious legal issues, I’m a little surprised Robert Half even tried to enforce paragraph 13 in court.

Implications

The court’s result may seem obvious, but it depended on California’s bright-line anti-non-compete statute. Other states are more tolerant of non-compete restrictions in employee contracts, so paragraph 13 may not be obviously void outside California. To me, this is a strength of California’s categorical approach to non-compete clauses and a weakness of other states’ laws. Most California employers wouldn’t try to pull a stunt like this, but in other states, ambiguity over a restriction’s enforceability could discourage departed employees from telling the marketplace about their credentials. If clauses like paragraph 13 become ubiquitous, we’ll probably need a federal law banning them.

Although the underlying lawsuit is a fairly typical dispute between employer and departed employees, this case raises questions about Europe’s efforts to erase truthful online search results (the so-called “right to be forgotten“). In effect, Robert Half sought to publicly erase truthful information about former employees’ connections to it. Suppressing truthful information rarely improves the functioning of marketplaces, and I think this case highlights the potential anti-competitive consequences. For a deeper dive on that topic, see my article The Regulation of Reputational Information.

Case citation: Robert Half International, Inc. v. Ainsworth, 2014 WL 7272405 (S.D. Cal. Dec. 17, 2014)