Six Strategies to Beat an Ohio Non-Compete

What are the Laws on Non-competes in Ohio?

In Ohio, the legal enforceability of non-compete agreements is analyzed in a four-part test. That test includes: (1) whether the employer has a legitimate business interest deserving protection; (2) whether a non-compete would be "no greater than is required for the employer to protect its legitimate interest"; (3) whether the non-compete imposes "no greater burden on the employee’s opportunity to earn a living than is necessary to protect the employer’s legitimate interest"; and (4) whether the non competes are "harmful to the general public." Ultimately, while it might seem that the analysis would be black-and-white, the court typically decides the issue based on the specific facts and circumstances of the case in an endeavor to balance the benefit to the employer with potential harm to the employee and the costs to the public at large. For example , the court has parsed the time period restriction in a non-compete on an employee by an analysis of what the employer feels is a reasonable period, versus what the courts deem is a reasonable period. More weight has been given to the employer in the case of doctor/patients issues, where no non-competition exists. As opposed to retail employees, whom only have a modest amount of contact with their customers. In addition, the geographic restriction has been analyzed in the same way, and the courts have been much more flexible in this regard as well. An analysis of what customers the employee actually contacted is weighed against what the employer states is reasonably necessary to protect its business.

Is Your Non-compete Enforceable?

If you’re facing a non-compete agreement, it’s important to take a close look at how it’s worded. For example, is it written in a way that might confuse your employer or create loopholes in their ability to enforce its terms? On the other hand, maybe your non-compete agreement is so broad that there’s no way you would be able to find adequate work to make a living. If your non-compete agreement is poorly written or in excess of what the laws in your state allow, you may be able to get it invalidated in whole or in part. But, you’ll never know that unless you have an experienced attorney review the contract.
Ohio courts place most of the responsibility on you when it comes to the validity of your non-compete agreement. If there are components of the contract that are vague or open to interpretation, your company is free to fill in the gaps when enforcing its terms in court. As a result, it’s usually very wise to scrutinize your non-compete upon signing and try to negotiate changes so that these loopholes are less potentially damaging to you.
Here are a few of the questions that can come up regarding your non-compete agreement:
Is the duration of your non-compete reasonable? A non-compete that lasts for three to five years often gets challenged as too long by plaintiffs, but the facts of the case are very important. Usually, anything less than two years is acceptable.
Is the geographical scope of the non-compete agreement unreasonable? Non-compete agreements that restrict competition in areas where the plaintiff has no presence at all can be killed by summary judgment.
Does the non-compete agreement limit your ability to get a job in a growing area? Courts have recognized that if you live in an area where an industry is growing, your non-compete agreement should not try to kill opportunities for employment in that industry.
Does the non-compete agreement require you to work in a certain area that is not tied to the company’s interests? Again, non-compete agreements should place a burden on the employee only if it gives a benefit to the company. For example, a veterinarian restricted from working in a neighboring town with competing businesses is likely to be able to challenge that term in the non-compete agreement.

Legal Grounds to Fight a Non-compete

Legal Defenses Against Non-Compete Clauses in Ohio
Several possible legal defenses can be used in an attempt to either invalidate or narrow the scope of a non-compete agreement. A recent decision from the United States Court of Appeals for the Sixth Circuit shines a light on these potential defenses.
The case involves Dan Sullivan, a former employee of the Cleveland business Sherwin-Williams, who left the company to work at a competitor. As would likely not come as a surprise to many readers, Sherwin-Williams had a non-compete agreement with Sullivan and sued him after he left to work with Rust-Oleum, his new employer.
In this recent ruling, the Court looked at two potential defenses that Sullivan had not raised in earlier litigation to determine if the restrictions in his non-compete agreement would stand. The court found that the non-compete clause was overly restrictive in its language about whether it was a reasonable restriction. The court also determined that Sullivan’s non-compete agreement was unenforceable under Ohio law due to the fact that it imposed a greater burden on Sullivan than the protection needed for the legitimate business interest of his employer.
The court in this case invalidated the non-compete clause in question, which was expansive and would have served to prevent Sullivan for working in his industry during the two-year restraint in the broader area of "the Continental United States." In practical terms, this means that this clause could have prevented him from carrying out a range of jobs in the United States. For a position that is less than executive in nature, this is probably not in line with the legitimate business interest of the employer.
While each case will be determined on its own circumstances, this particular decision from the Sixth Circuit may provide a basis upon which to challenge other non-compete agreements that are both too severe and overly broad in their restrictions.

Negotiating a Release or a New Agreement

Whether your former employer has contacted you or you have come to your senses and reached out to them, a key issue is whether the company will agree to release you from the non-compete. There is no magic formula for deciding this issue. It depends on whether the employer wants you back or simply wants you off competition until the non-compete expires. If your employer is a significant player in your market, and if you have skills that are hard to replace, the company may be willing to compromise some protection to bring you back.
If the employer is out of the business or does not need you, it may be very hard to get your employer to agree to release you. Whether you have an attorney and whether you intend to pursue litigation is also relevant, as the employer may want to save money and avoid litigation at the front end .
When you reach out to the employer, and before you get a cease and desist letter or other legal correspondence, it is important that you use a businesslike approach. You want to avoid making it ugly. The non-compete may need to be re-drafted, as the scope may be too broad to start. This is a chance to put the parties on a better footing as to the time and scope of post-employment restrictions. You should evaluate whether the key customer relationships associated with the former employee will really follow the employee to a new job, and how the non-compete treats those potential customers. When approaching the company, you should discuss simple contractual ideas applicable to all non-compete agreements: is the restraint too broad and is it really no-competition as to all sales and customer contacts? Should the post-termination period be shortened?

Seeking Legal Counsel and Representation

In Ohio, the law regarding non-compete agreements is complex and evolving. Therefore, it is important to seek the advice and representation of a legal expert that is familiar with the latest legislation and relevant case law. An experienced employment lawyer can help assess all possible legal options for overcoming the terms of a non-compete agreement. In particular, there are three primary things that a lawyer can do.

Other Paths to Victory

Inherent to any dispute over a non-compete agreement is the parties’ divergent interests in resolving the dispute. On the one hand, the former employer seeks to safeguard confidential information and maintain the value of its customer relationships. The key desire for the employee is to move on and do the job the employee was hired to do, without the cloud of litigation over him or her. To the extent not specifically prohibited by the agreement, the employee wants to earn a living for himself/herself and provide for his or her family.
Preceding sections of this guide describe how to litigate these types of cases. Not infrequently, discovery in such cases will permit the parties to better understand the other’s position and jointly focus on a resolution that is satisfactory to both.
Not every case, however, is susceptible to "quick resolve" or is amenable to a negotiated resolution (even when one side’s case may be weak or suspect). Given the likely long-term nature of the employer-employee relationship, litigation can take years.
In those circumstances, it makes sense to consider the alternative paths trustees and estate fiduciaries have for resolving their disputes with employees over non-compete agreements: mediation and/or arbitration.
Mediation is a non-binding process that provides a forum for the parties to resolve the matter outside of the court system. A neutral third-party mediator facilitates the session(s), which can occur in person or be done virtually if that is desired.
The mediator works for both parties to forge a resolution that each party can accept. Because this is a voluntary process, if the parties can reach resolution there is greater certainty that it will hold, versus being rejected by a judge or jury.
To the extent a court action has been filed, the hearing date is often postponed to facilitate the mediation. Mediation can take place before or after formal discovery, although until such time discovery has occurred parties may not be able to fully know or appreciate what the other side’s claims or defenses are , even if the agreement itself is clear.
Mediation can be an effective tool in resolving disputes under non-compete agreements because it focuses the parties on a resolution that each can live with, instead of seeking a complete win (i.e. all or nothing). Mediation can remove the emotion from the dispute and can lead to a cost-effective resolution.
Arbitration provides a vehicle for the parties to submit their disagreement to a neutral third-party arbitrator, who serves as a private judge. The arbitrator hears testimony and reviews evidence, and then makes a decision. The decision of the arbitrator is binding and a court can enforce the ruling, although it is not uncommon for the losing party to seek a trial de novo in the district court. Some private agreements have provisions to prohibit a trial de novo request, however.
The arbitrator lends the appearance of neutrality and will work to similarly fashion a resolution that each party can live with. Further, the arbitration process is designed to limit the first-hand exposure to the public. Understandably, the parties will be motivated to keep their dispute private and confidential, including at times the actual results of the arbitration.
It is important to note that arbitrators are limited by the agreement they are called upon to interpret, but do have discretion in fashioning equitable remedies (e.g. enforceable restrictions, not putting the employee back in the position he/she was before the non-compete was signed).
Put another way, an arbitrator is not bound to approve liquidated damages that may have been included in the contract if the arbitrator determines that they are unreasonable and the agreement is otherwise enforceable.
Ohio law does not require the use of arbitration in resolving non-compete disputes. The fact that arbitration is a "creature of contract" means that a willing employer and employee can jointly agree to delegate their dispute to an arbitrator. Using the arbitration option of resolving non-compete disputes may be more palatable in certain circumstances, such as where there is a total breakdown in trust between the parties.