Employee Non-Competes in Ohio
Have you heard of a covenant not to compete, sometimes called a non-compete? It is a clause that appears in many employment contracts. A non-compete provides that after termination of the relationship, the employee agrees not to compete against the employer within a specified geographic region for a certain period of time. Are they enforceable? Brace yourself for the classic attorney answer: it depends.
Non-competes present interesting legal challenges, which reflect the opposing interests at play.
If we step into the shoes of the employer, we can envision an unfair scenario: the company, Honesty, Inc., hires a new employee, Shifty Smith. Shifty gets access to the company’s valuable secrets (a secret formula, business plan, product launch, price list, customer list, etc.). Then, after Shifty has soaked up all of this valuable knowledge, Honesty, Inc.’s main competitor hires him.
Without warning, Honesty, Inc. finds itself in a position where its competitor knows all of its secrets. Obviously, this could be devastating to the company’s business. But wait! Shifty signed a non-compete when he got hired, so he can’t do that. Can he?
Now look at virtually the same scenario from the perspective of the employee. This time, the employee is the saintly Tom Joad.
The company, Sweatshop Co., has been mistreating Tom for years. He gets a chance at a better life when Sweatshop Co.’s main competitor offers him a new job with more pay. But during his first week on the job, he and his new employer get slapped with a lawsuit. Sweatshop Co. pulls out some paper he signed the first day on the job with a non-compete in it. Wait a minute! This is America – how can a former employer keep an honest worker from making a living? They can’t do that, can they?
Courts in Ohio recognize these competing interests and have to balance them. On the one hand, we believe in free trade and the right of a person to earn a living in their chosen field. On the other hand, it seems unfair to let Shifty Smith destroy a company, especially when he voluntarily signed something saying he wouldn’t compete. More than any other area of the law I know, the particular facts and circumstances of each case will dictate whether or not a court will enforce the non-compete. The court will look at reasonableness of the clause: how long does the person have to stay away from working in that industry? A rule of thumb is that no court will enforce a clause for more than 2 years. In many industries, the time period could be as short as a few months. Also, if the company is local in nature, it will only be protected in its locality. If the person moves 50 miles away, the clause will not be enforced. The court will also look at whether the employer needs the non-compete in this situation, asking questions like: how much does the person’s new role rely upon information received from the first company? Does the employee really have inside trade secrets, or just general information? Would this clause stifle the employee’s preexisting skill set, leaving him no way to earn a living? These factors are just the tip of the iceberg. Ultimately, courts try to balance the interests as fairly as possible. Often, it comes down to whether they view the employee as an honest person trying to make a living or a sneaky, unethical person trying to cash in on their privileged position in the company.
Attorney is Critical
Because the inquiry is so detailed and fact-sensitive, this is one kind of lawsuit where the attorney you have really matters. The attorney should be well versed in this area of the law, as well as experienced in the courtroom. I have tried dozens of these cases, and have been up against extremely skilled lawyers on the other side, as well as lawyers who don’t seem to have a clue. Make sure you have the right kind on your side!