When Non-Compete Agreements Fail in Ohio

by | Mar 26, 2020 | Business Law |

While non-competition agreements are legal in Ohio, they are scrutinized carefully by the courts. Such restrictive covenants are lawful if the restraints are reasonably necessary to protect the employer’s legitimate business interests. Each covenant must be analyzed using a variety of factors to ensure it does not: (1) extend any further than required for the protection of the employer; (2) impose undue hardship on the employee; or (3) injure the public. Employers have the burden to prove each constraint satisfies these requirements. However, many employers that require their employees to sign these agreements violate these constraints in order to control the market and artificially reduce turnover, among other reasons.

Some of the most common factors that will cause a non-compete provision to fail for lacking reasonableness include:

(1) extreme time and space limitations,

(2) whether multiple employees had contact with the same customers,

(3) whether the employee lacks confidential information and trade secrets,

(4) broad language designed to eliminate both unfair and ordinary competition,

(5) stifling an employee’s inherent skill and experience,

(6) the disproportional benefit to the employer compared to the detriment to the employee,

(7) barring the employee’s sole means of support,

(8) when the covenant restrains skills that were actually developed with another employer, and

(9) whether the scope of forbidden work is too broad.

In our practice, we meet with many employees who are forced to sign non-compete agreements even when they are non-managerial, hourly workers with low-level (if any) access to employer strategies, business plans, and other confidential information. These workers normally do not possess any trade secrets that make the restrictions of a non-compete valid and enforceable. They commonly have developed skills and industry knowledge that predate the time they first began working for their most recent employer. And they usually find the restrictions on what employment they can seek to be so onerous as to essentially lock them out of the only business market they have ever known – making their skill set practically worthless to any potential successive employer. All the above circumstances tend to make the successful enforcement of non-compete agreements less likely.

So, if all these pitfalls to enforcing non-compete agreements exist, you might ask why so many employees have been forced to sign them. The answer is because the Supreme Court and General Assembly continue to support their existence, and courts will sometimes go so far as to amend the language of the agreement to make it enforceable. There is also the economic reality that, for most employees and their employers, it is far less expensive to settle these claims than to argue over them at trial. These agreements act as a proverbial stick to make employees think twice before leaving to work for a competitor.

If you are an employer or employee facing a contested non-compete matter, we invite you to contact our office and speak with one of our attorneys for a free consultation. We offer both in-person and virtual meetings to accommodate your needs.