The ABA Journal has the story about a law firm suing an associate who signed a employment contract providing for three year term. The associate left after just one year. The contract includes a stipulated damages clause that requires the payment of $10,000 if the associate leaves before the end of the three years. A law firm had made a loan to the associate of $2,500 dollars for bar exam expenses. It deducted the loan and then liquidated damages from her last paycheck, but the associate came up $7,400 dollars short. The law firm claims that it spends considerable resources on the training of new associates.
Would parties to such a contract in California violate Rule of Professional Conduct 5.6(a)(1)?
(a) Unless authorized by law, a lawyer shall not participate in offering or making:.. a partnership, shareholders, operating, employment, or other similar type of agreement that restricts the right of a lawyer to practice after termination of the relationship…
Unknown. But the words of a legal recruiter quoted in the story ring true: this can't be good for firm recuiting.