What Ohio Small Business Owners Need To Know About Non-Compete And Non-Solicitation Agreements

Two of the most popular legal tools for Ohio small businesses are non-compete and non-solicitation agreements. These are used to safeguard customer relationships, confidential information, and investments in your employees. Unfortunately, there’s a large amount of confusion regarding these agreements, and if not drafted properly, they can be unenforceable. It is therefore necessary to understand how Ohio law applies to these agreements before asking someone to agree to one of these legal restrictions. 

Are non-compete agreements enforceable in Ohio? 

While non-compete agreements are generally allowed in Ohio, the court will only enforce such an agreement if it is reasonable. This means that the court does not automatically enforce the contract simply because it exists. Rather, the court determines whether the non-compete agreement goes beyond what is necessary to protect the employer’s business interests.

If the court determines that the non-compete agreement is unreasonable, the court can refuse to enforce the agreement or force the party to make the agreement reasonable. This can create confusion for businesses that have entered into an unreasonably broad non-compete agreement. 

What makes a non-compete “reasonable”? 

There are typically three factors that Ohio courts will look at when evaluating a non-compete agreement. These include: 

• Duration – How long the restriction will be in place
• Geographic scope – Where the employee will be forbidden from working
• Scope of activity – What the employee will be forbidden from doing

For instance, a restriction for a year within the geographic area where the employee worked will be much more likely to be upheld than a five-year restriction, nationwide, on what the employee can do. The courts will be suspicious of a contract that will prevent a person from earning a living in their field. 

Non-solicitation agreements as an alternative 

For many small businesses in Ohio, non-solicitation agreements prove to be more protective with less legal risk. In most cases, they will prevent an employee from soliciting customers, vendors, or other employees for a specific time period.

Since non-solicitation agreements are narrower in scope, they are more likely to be enforced by the courts. This can prove to be more beneficial to businesses that still want to maintain client relationships without stifling competition. 

Special considerations for employees vs. independent contractors 

Whether or not the worker is considered an employee or an independent contractor can impact whether the agreement is enforceable or not. In some cases, the courts will subject a written covenant more closely when applied to workers who don’t make a ton of money or have limited bargaining power.

In addition, the State of Ohio mandates that there be some consideration or something of value that is exchanged between employee and employer. In some cases, continued employment can be enough. In others, if the agreement isn’t properly drafted, it can be challenged in court. 

Talk to a Columbus, OH, General Counsel Business Attorney 

Kohl & Cook Law Firm, LLC, represents the interests of businesses looking to draft agreements with their employees. Call our Columbus general counsel lawyers today to schedule an appointment, and we can begin discussing your next steps right away.