Employees Bound By Clickthrough Agreements–ADP v. Lynch

An employer sued two departing employees for joining a competitor. The employer sought to enforce, among other things, a non-compete clause (the court calls it a restrictive covenant). The employer included the non-compete provision in stock option grant documentation presented to employees electronically, which isn’t surprising because employees will agree to just about anything to get their stock option grants. The employees defended the employer’s lawsuit on lack of jurisdiction. The employer pointed to a venue selection clause that was included in the grant documentation along with the non-compete.

The court finds the contracts were properly formed (cites omitted):

At this stage in the litigation, the Court finds that the forum selection clauses are encompassed by enforceable clickwrap agreements. The complaints unequivocally allege that an employee could not accept any stock grants until acknowledging that he or she reviewed all grant documents, including the Restrictive Covenants that contained the forum selection clauses. Similarly, Beatriz Caban, ADP’s manager of Stock Plan Services, has provided a step-by-step rundown of how an employee would accept awards under the 2011, 2012, and 2013 grants. In order to accept those awards, an employee would have to affirmatively acknowledge that he or she reviewed the Restrictive Covenants before proceeding. Ms. Caban similarly indicated that Defendants could not have accepted stock awards in 2014 and 2015 without acknowledging the Restrictive Covenants issued for those years as well.

As I’ve previously blogged: a mandatory clickthrough is great; having compelling enough evidence of the formation process to convince a judge to enforce the clickthrough pre-summary judgment is even better.

The court rejects some defense arguments. Citing Fteja, Zaltz and others, it’s immaterial if the defendants weren’t required to read the agreement terms.

Also, the defendants challenged the call-to-action. The employer didn’t say “I agree to the terms of the grant documents” or something similar. Instead, the call-to-action required employees to acknowledge they had read the stock option grant documents. The court “considers this a distinction without difference” because the document’s terms self-affirmed that accepting the option grant meant accepting the entire set of document terms (the court paraphrases the contract language: “in exchange for good and valuable consideration, the ADP employee agrees to the terms of the Covenant, including the provision concerning jurisdiction”).

We already knew that clickthrough agreements work really well in the B2B and B2C contexts. Thus, it’s not surprising that clickthrough agreements also work in the employment context, at least so long as they are supported by consideration (and stock option grants usually, if not always, will provide sufficient consideration for additional contract terms). Although ink-signatures-on-dead-trees remains the gold standard for forming contracts with employees, forming contracts with employees online is probably a better method than some other traditional techniques, such as circulating employee handbooks or memos and embracing the fiction that an employee continuing to show up at work constituted acceptance. A clickthrough agreement provides tangible evidence that employees “got the memo” (even if they chose not to read it); and the fact that no one reads online contracts is inconsequential in the context of employee handbooks, which are also widely celebrated as documents that no one reads.

Still, the employer could improve its practices by using a proper call-to-action. This is trivially easy to do, and I trust the employer in this case will revisit theirs.

Case citation: ADP, LLC v. Lynch, 2016 WL 3574328 (D. N.J. June 30, 2016)