Employment Terms Defined: Non-Compete Agreement

One of the most common types of employment contracts in Ohio is the non-compete agreement. These legal documents are binding contracts between an employer and their employee and they prevent an employee from working for a competing business for a certain period of time. A non-compete agreement stands even if the employee is terminated from their position without just cause.

Non-compete agreements can seriously limit an employee’s ability to obtain employment once they leave their current employer. Violating the contract, though, comes with serious consequences.

Restrictions on Non-Compete Agreements Must be Reasonable

Ohio law states that non-compete agreements are enforceable as long they are reasonable. Determining what is reasonable and what is not largely depends on the facts of a specific case. The courts must apply certain legal tests outlined by the Ohio Supreme Court. Non-compete agreements are considered reasonable, if the restrictions contained within it are not:

• Greater than what is necessary to protect the legitimate business interests of the employer,
• Going to be a cause of undue hardship for the employee, and
• A violation of public policy.

Factors the Court Will Consider

Whether a non-compete agreement is considered reasonable will depend on a number of factors. The courts will consider the following factors when determining the reasonability of a non-competition clause:

• The length of time the employee is restricted from working for the competition
• The size of the geographic area the agreement prevents the employee from working
• Whether the employee is privy to trade secrets or the employer’s confidential information
• Whether the agreement is an attempt to prevent ordinary competition in the marketplace or to unfairly eliminate competition
• Whether enforcement of the agreement would leave the employee without financial support, and
• Any other relevant factor.

Of the above factors, there are two that are particularly important. The first is the length of time employees are prohibited from working for competing businesses. The majority of non-compete agreements outline a timeframe of six months to two years. With the exception of a few scenarios, the courts will likely not enforce a contract that has a length of more than two years.

The second most important factor is the geographic scope of the contract. The larger the geographical area an employee is prevented from working in, the less reasonable the agreement becomes.

The Blue-Pencil Doctrine

Even when the courts find a non-compete agreement to be unreasonable, it does not mean they will throw out the document entirely. The courts have the authority to strike out certain provisions of an agreement and rewrite them so the document can be deemed enforceable. This is legally known as the “blue-pencil doctrine.” For example, a court may strike out the geographic area which includes the state of Ohio and surrounding states to only include Ohio.

Our Employment Lawyers in Columbus Can Review Your Contract

If you have already signed a non-compete agreement or your employer is pressuring you to sign one, our Columbus employment lawyers can review it for you. At Marshall Forman & Schlein, our skilled attorneys can determine if the agreement is fair and if not, help you secure better terms. Call us today or contact us online to schedule a free consultation and to obtain the legal advice you need.