Are Non-Compete Agreements Still Legal?

The legality of non-compete clauses in the U.S. is a complicated subject. Non-competes are generally governed by state laws. The Federal Trade Commission (FTC) has attempted to enact a nationwide ban on non-competes. However, this rule is being challenged in the courts.

The State of Ohio permits non-compete agreements as a means for employers to safeguard their business interests. The only caveat is that the agreement must be “reasonable.” This legal stance originated from the 1975 Ohio Supreme Court case, Raimonde v. Van Vlerah. 

What constitutes a “reasonable” non-compete agreement? 

To be considered reasonable, and thereby enforceable in Ohio, a non-compete agreement must satisfy three conditions. These include:

• No greater than required – The restrictions on the employee cannot exceed what is necessary to protect the employer’s legitimate business interests.

• No undue hardship – The agreement cannot create an unreasonable burden on the employee.

• Not injurious to the public – The restrictions cannot negatively impact the public’s interest.

Factors considered when determining reasonableness 

When assessing the reasonableness of a non-compete, the Ohio courts will evaluate several factors. These include:

• The duration – The length of time that the employee is restricted from competing for another position.

• Geographic scope – The area where the employee is prohibited from working in a new position.

• Confidential information – The extent of confidential information and/or trade secrets the employee has access to.

• Fair vs. ordinary competition – Whether the agreement aims to prevent unfair competition or typical competition.

• Balancing the employer’s benefit against the employee’s hardship – The balance between the employer’s benefit and the hardship it imposes on the employee.

• Employer’s financial support – Whether enforcing the agreement would leave the employee without financial means.

Blue pencil doctrine 

In cases where an Ohio court determines that a non-compete agreement is unreasonable, it can rewrite the agreement to make it enforceable. The process is known as the “blue-pencil doctrine.”

Proposed legislation would ban non-competes 

There is currently a law being considered that would effectively ban non-compete agreements in Ohio. Ohio Senate Bill 11 could potentially ban the use of non-competes for a wide range of workers.

• Broad definition of “worker” – The bill defines “worker” quite broadly to include employees, independent contractors, externs, interns, volunteers, apprentices, and even sole proprietorships. This broad definition would require employers to review nearly all existing non-compete agreements for compliance and expose them to additional legal obligations and liabilities if they don’t adhere to the bill’s provisions.

• Ban on forum and venue selection clauses – The bill would ban employers from requiring an employee to litigate a non-compete in the venue of their choosing. This could increase litigation costs for employers.

• Penalties for employers – SB 11 would allow workers to sue employers over non-compete violations. Workers could also file complaints with state officials who could take action on their behalf.

Talk to a Columbus, OH, Non-Compete Attorney Today 

Kohl & Cook Law Firm, LLC, represents the interests of workers or employers who are litigating a non-compete agreement. Call our Columbus consumer lawyers today to schedule an appointment, and we can begin discussing your next steps right away.

Source:

case-law.vlex.com/vid/raimonde-v-van-vlerah-894598220