Changing jobs can be stressful, especially if a noncompetition agreement is involved. “Noncompetes,” as they are often called, prohibit former employees from working for a competitor or soliciting customers for a certain period of time. Although these agreements are commonly used for service professionals and commercial salespeople, they are not limited to any particular types of work. Ohio courts have considered noncompetes for a wide variety of occupations, including a veterinarian, a bail bondsman, and a vegetable salesman.
This article addresses some of the questions—and misconceptions—that employees may have about noncompetes.
Q: I have heard that noncompetes cannot be enforced. Is that true?
A: Reasonable noncompetes have been enforceable under Ohio law since the 1940s. The relevant factors specified by the Supreme Court of Ohio include: whether the restrictions are necessary to protect the employer’s legitimate interests; whether the restrictions would impose an undue hardship on the employee; and whether the restrictions would injure the public. Applying this standard, many Ohio courts have enforced noncompetes.
If, however the restrictions are too broad under the circumstances, the court may modify the noncompete and impose more limited restrictions. For example, an agreement not to compete for three years in ten states might be enforced for just two years in five states.
Q: After several years with the same company, I have been told to sign a noncompete if I want to keep my job. Is this legal?
A: Yes. Ohio law does not prevent employers from making noncompetes a mandatory condition of employment or continued employment. Exceptions may exist, however, for employees who are already covered by individual employment agreements or union contracts.
For "at-will" employees who can quit or be discharged at any time for any reason, companies need not provide any signing bonus or other benefits in exchange for a new noncompete agreement. Under a 2004 decision by the Supreme Court of Ohio, the company's agreement to continue the employment relationship for even a brief period is enough to create a binding contract.
Q: What can happen if I violate the noncompete?
A: Your former employer can sue to keep you from working in your new position or contacting customers for the time period specified in the agreement. Additionally, the lawsuit might seek money damages against you for violating the agreement.
In practice, many noncompete disputes are resolved by a negotiated settlement that is acceptable to the former employer, the employee, and the new employer. Depending on the circumstances, your former employer might consider a compromise that would protect its business interests and avoid litigation.
Q: I am thinking about leaving my current job to join a competitor. What should I do about my noncompete?
A: Review your noncompetition agreement carefully and consult with an attorney who practices in this area of the law. Be sure to tell your prospective employer about the noncompete so the employer can make an informed decision before hiring you. Your new job could be jeopardized if the company first hears about your noncompete from your former employer or its attorneys.
Remember that, when you announce your resignation, your employer may examine anything that shows what you did before you resigned, including e-mails and other communications with co-workers and customers. With or without a noncompete, you owe good faith and loyalty to your employer until the employment actually ends. Your attorney can help you create a list of “dos” and “don’ts” as you prepare to change jobs.
Law You Can Use is a weekly consumer legal information column provided by the Ohio State Bar Association (OSBA). This article was prepared by Justin D. Flamm, an attorney in the Cincinnati office of Taft Stettinius & Hollister LLP.