Ohio employers utilize non-compete agreements to keep their highly sought after employees from walking out the door to a competitor. While non-compete agreements are enforced by Ohio courts, they are heavily scrutinized based upon the underlying facts in each case.
The key, but very vague, standard considered by the courts is whether the non-compete agreement is reasonably necessary to protect the employer’s legitimate business interests. In other words, what are the interests that the employer is protecting? This would include the employer’s goodwill developed in customer relations. Courts recognize that this is a protectable interest, such that non-compete agreements can be utilized to prevent this goodwill from walking out the door and going to a competitor.
Protectable interests also include confidential or trade secret information the departing employee had access to. This confidential information often comes down to the employer’s customers and customer information that the employee worked with.
Of course, the courts do not allow unlimited or excessive non-compete agreements. Courts look at geographic scope, or the area that the employee is agreeing not to compete in. Does the non-compete agreement include the entire U.S.? For many types of employees, that is likely to be found unreasonable. Or is the non-compete limited to a city, state or a reasonable distance from the employee’s current work location?
Courts also consider the amount of time the employee agreed to not compete. Courts have enforced one year or, for some employees, even two year non-competes. When you get beyond two years, the time frame is problematic and is likely an uphill battle to enforce. Of course, the underlying facts regarding the nature of the business, the customer relationships, and the market at issue will be looked at by courts regarding both the time and geographic scope of the non-compete agreement.
Other factors the courts have considered are whether the employee is the sole contact with the customer, the amount of time the employee was employed and the steps taken by the employer to keep its information confidential. This is not an exhaustive list, as each case and employment relationship is unique with case specific facts and circumstances to be considered by the court.
Court challenges to a non-compete agreement are not an all or nothing venture. When examining a non-compete agreement, Ohio courts also have the ability to modify any terms that it deems unreasonable. Classic examples are a court finding the time or geographic restrictions unreasonable and issuing an order shortening the time or shrinking the geographic area the non-compete applies to. This provides flexibility for the employer to still enforce a non-compete agreement a court initially deems unreasonable. (Such modification is not true under all states’ laws.)
Non-compete disputes often end up before the courts because many employees believe they are not, or should not be, enforceable. In addition, there is sufficient funding for non-compete lawsuits, as new employers will often retain counsel for the employee to challenge the non-compete agreements with the prior employer.
As with many employee/employer legal questions, the ultimate enforceability of a non-compete agreement will depend on the specific facts at issue. All parties should take these issues seriously and consult with experienced legal counsel about their options and positions.
This article should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.
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