Employers regularly utlize non-compete agreements to protect their interests-such as trade secrets, confidential information and resources spent to train and educate their employees. The necessary result is that many employees face the decision whether or not to execute such an agreement when starting a new job or even accepting a promotion.
How to properly draft an enforceable agreement not to compete, and deciding whether one should commit to the same, are questions that do not always have a definite answer. Nonetheless, with some forethought and proper planning, both employers and employees can reduce the chances of an adverse outcome related to a non-compete agreement.
There are two primary components of any covenant not to compete: (1) the geographical restrictions; and, (2) temporal restrictions. If these two components are not drafted to be “reasonable” in scope, then the agreement risks being declared unenforceable by an Ohio court. Raimonde v. Van Vlerah (1975), 42 Ohio St.2d 21. In other words, a court may find the agreement is simply not necessary to protect any “legitimate business interest” of the employer; but rather, merely seeks to eliminate ordinary competition. HCCT, Inc. v. Walters (1994), 99 Ohio App.3d 472. Although what is deemed reasonable will vary depending on the industry and facts of each situation, Ohio courts use certain parameters to guide their determinations.
In Ohio, when seeking to enforce an agreement not to compete, the employer bears the burden to demonstrate by clear and convincing evidence that the agreement: (1) is necessary to protect the employer’s legitimate business interests; and, (2) does not impose undue hardship on the employee. Rogers v. Runfola & Associates, Inc. (1991), 57 Ohio St. 3d 5; Brentlinger Enter. v. Curran (2001), 141 Ohio App.3d 640, 645-46.
When applying these elements, courts consider several factors an employer and employee must consider when drafting, negotiating or deciding whether to enter into such an agreement: if the time and space restrictions are reasonable; if the employer spends substantial time and resources to train or educate the employee; if the agreement merely seek to suppress the employee’s inherent and pre-obtained skills or experience; if the employee possesses confidential information or trade secrets; if the employee represents the sole contact with the employer’s customers; if the agreement seeks to bar an employee’s sole means of support; and, ultimately, if the benefit to the employer is disproportionate to the detriment on the employee. Raimonde, 42 Ohio St.2d at 25.
In summary, there are several things that must be considered when dealing with an agreement not to compete. Whether you are an employer drafting such and agreement or an employee negotiating, or contemplating whether to enter into such an agreement, the reasonableness and enforceability will differ depending on the industry and specific facts of each case. The attorneys at Mowery, Youell & Galeano, Ltd., have the experience and knowledge to guide both employers and employees in making the right decisions regarding the many issues that arise with a covenant not to compete.
By: Jeffrey P. Nagle