Clicking Your Way to Enforceability – Court Enforces “Clickwrap” Non-Compete Agreement

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You’ve heard the buzz about Pokemon GO and decide to give it a try.  After installing the game on your phone and moving past the initial splash screen, you’re presented with the game’s Terms of Service, which you may “Accept” or “Decline.”  Just a single click stands between you and Pokemon-hunting goodness!

If you clicked the “Accept” button, you just entered into a “clickwrap” agreement.  Does that mean you’re now bound by everything stated in the Terms of Service?  The answer to that question is important from an HR perspective because work forms are increasingly being digitally executed by current and prospective employees over a computer network.  Thankfully, the answer is yes, as a recent New Jersey decision confirmed.

In ADP, LLC v. Lynch (D.N.J. June 30, 2016), a business outsourcing company (ADP) sued two former employees to enforce non-compete, non-disclosure, and non-solicitation provisions in a restrictive covenant agreement.  The defendants had enrolled in ADP’s stock award program electronically.  In order to receive awards in the program, they were required to click an “Accept Grant” button.  The option to click this button was unavailable until they affirmatively check a box acknowledging that they had read a collection of documents, including the restrictive covenant agreement.  The defendants had checked the box and clicked on the “Accept Grant” button.

The significance of this fact became apparent when the defendants, who were not residents of New Jersey, argued that the New Jersey court lacked personal jurisdiction over them.  The court noted that defendants had consented to the personal jurisdiction of New Jersey courts in the restrictive agreements.  The defendants argued that that the forum selection clause in the restrictive covenant agreement was unenforceable because they did not receive adequate notice of the clause.  The court rejected this argument as well, noting other cases in which clickwrap agreements incorporating additional terms by reference were regarded as providing reasonable notice that additional terms apply.  Some courts have even enforced clickwrap agreements that do not require affirmative confirmation that the signatory reviewed the terms before agreeing to them.  ADP was therefore allowed to pursue its lawsuit.

ADP confirms that electronic consent to agreements incorporated by reference into a clickwrap agreement is legally valid, assuming the agreements are supported by adequate consideration.  To build an even better case for enforceability, employees should be required to confirm their agreement with (not just acknowledgment of) the incorporated documents.  But beware of the clickwrap agreement’s close cousin—the “browsewrap” agreement, which states that continued action (like browsing the contents of a web page) constitutes agreement with certain terms.  Courts routinely refuse to enforce browsewrap agreements.   Requiring employees to manifest their agreement through affirmative conduct – like clicking on a button – is essential.

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