As a general rule, employee noncompete agreements are enforceable in Ohio, and employers have the right to require employees to sign noncompete agreements as a condition of employment. However, there are limits on the degree to which an employer can restrict an employee’s right to work elsewhere, even with respect to preventing an employee from working for companies that are in direct competition with the employer. Moreover, noncompete agreements that are overbroad will not be enforced by Ohio Courts, at least to the extent that the restrictions contained in the noncompete agreement are greater than necessary to protect the legitimate business interests of the employer against unfair competition.
Noncompete agreements typically include three types of restrictive covenants: 1), prohibiting acceptance of employment with competitors of the employer or generally in the employer’s industry for a defined period of time and within a defined geographical area; 2) prohibiting solicitation of the employer’s customers to do business with a competitor for a defined period of time; and 2) prohibiting the solicitation of current employees to leave the employer to work for a competitor for a defined period of time. These covenants typically apply both during employment and after employment for the specified duration.
There are several principals to keep in mind when evaluating the enforceability of a noncompete agreement. Noncompete agreements operate as a restraint of trade and are strictly construed against the employer. The restrictions imposed by a noncompete agreement must be limited to protect only the legitimate business interests of the employer. The restrictions must not impose an undue hardship upon the employee, and must not be injurious to the public interest. These principals are co-dependent in application. In other words, the reasonableness of a restriction in a noncompete agreement is assessed by the extent to which the restriction is necessary to protect the legitimate business interests of the employer, without placing an undue hardship upon the employee and without injury to the public interest.
Key point: An employer’s business interests are legitimate and protectable only to the extent the employer is seeking to prevent unfair competition.
Key point: Adequate consideration to support a noncompete agreement exists when accepting the noncompete is made a condition of hiring or continuing employment.
Key point: A noncompete agreement that is overly restrictive is still enforceable, but only to the extent the restrictions are actually necessary to enforce the employer’s legitimate business interests by preventing unfair competition.
Key point: An employer’s failure to enforce noncompete agreements in the past can limit the current enforceability of the noncompete restrictions.
The degree to which a noncompete agreement is enforceable will vary in specific situations, depending on the applicable facts and circumstances. Employees are well advised to consult with legal counsel to understand the validity and enforceability of a noncompete agreement. Folkerth and Folkerth has substantial experience drafting, interpreting, and litigating noncompete agreements.
Disclaimer: This article has been prepared by attorneys employed by this firm and is provided for general information purposes only to permit you to learn more about our firm, our services and the experience of our attorneys. The information presented is not legal advice, may not be applicable or may be contrary to the laws of certain jurisdictions, is not to be acted upon as legal advice, may not be current, and is subject to change without notice.