Few components of employment contracts are more controversial than noncompete agreements. Companies ranging from fast food businesses that only pay minimum wage to startups hiring executives often demand that employees agree not to compete with the company in the future.
Employees frequently sign these documents without considering their implications, and companies sometimes threaten to enforce them even when doing so is not truly necessary for their own financial protection.
Businesses trying to protect their trade secrets and employees just trying to support themselves can find themselves worried about the potential enforcement of a noncompete agreement associated with an employment contract. Will the Ohio courts uphold a noncompete agreement if a former employee of a business starts a competing company or goes to work for a competitor?
An enforceable noncompete agreement must meet certain standards
A noncompete agreement doesn’t have any power until the company that had the worker sign the agreement asks for court enforcement. When a worker goes on to start their own business or to accept a job offer from a competitor, the former employer could try to stop them.
Not all noncompete agreements will hold up under court scrutiny. Such agreements need to meet certain standards to hold up in court.
What makes a noncompete enforceable?
The agreement itself needs to be realistic. There typically need to be reasonable limitations on the restrictions the agreement places on the employee. Limiting its effect to a specific location or amount of time is usually a crucial part of making a noncompete agreement enforceable. The worker also needs to have received some kind of consideration for making the concession. In Ohio, the courts have held that not being fired is consideration enough when asked to sign a noncompete agreement, so the consideration need not be in the form of a payment.
The second concern that court will consider is whether enforcing the agreement is necessary for a company’s financial protection. Stopping someone with no trade secret knowledge who only ever commanded minimum wage from pursuing the same position elsewhere could come across as a way to punish or control the worker rather than protect the business.
Finally, the enforcement of the agreement must not create an undue hardship for the worker. Keeping someone out of any employment or preventing them from using their education to support their family could be an undue and unreasonable hardship. However, preventing someone from competing in a reasonable geographical area will be considered reasonable. In other words, an employee may not be allowed to work in Cincinnati, but would be allowed to work in Cleveland if your former employer does no business in Cleveland. Forcing an employee to relocate to find a job is usually not considered a hardship.
Understanding what makes a noncompete agreement valid and enforceable in the eyes of the Ohio courts can help businesses and individuals determine how to handle a noncompete agreement dispute.