5 Things to Know About Non-Compete Agreements

Employment contract1.      Assume they are enforceable.  Ohio courts, and courts around the country, routinely enforce non-compete agreements to guard against unfair competition and to protect an employer’s confidential information, trade secrets, and business goodwill.  The law allows an employer to protect its legitimate business interests and non-compete agreements are one arrow in the quiver available to employers to prevent sensitive and competitive business information from landing in the hands of a competitor.

2.      Be reasonable.  Non-compete agreements are valid only so long as they are not too restrictive.  They must be reasonably limited in duration – the length of time a former employee is restricted from working for a competitor. And non-compete agreements must also be reasonably limited in scope – the geographic territory in which a former employee is restricted from working.  The overriding goal of a non-compete is to protect an employer’s legitimate business interests.  Agreements that go beyond what is necessary to protect these interests are at risk.

3.      Be deliberate.   Only certain employees need sign a non-compete.  One size does not fit all and in most circumstances it is unnecessary.  Those employees who legitimately have access to sensitive business information are the employees who should be restricted by a non-compete.  Who are the most likely employees to be picked off by a competitor?  Managers, operations personnel, sales employees and the like are the most likely to possess sensitive business intelligence  that an employer does not want in the hands of a competitor.

4.      Be consistent.    When an ex-employee violates the restrictions in a non-compete, the restrictions should be enforced.  If an employer chooses to selectively enforce its non-compete agreements – e.g. insist one former employee honor the agreement while allowing another former employee to work for a competitor in violation of the agreement – a legitimate question is raised as to whether the non-compete agreements are intended by the employer to protect legitimate business interests.

5.      Respect others.  An employer must learn whether a potential hire is restricted by a non-compete agreement.  Frequently new employers are made aware of non-compete agreements after a hiring decision is made.  This is often too late and significant damage may already have been done.  An employer must determine early in the process whether a candidate has a non-compete and, if so, the employer must obtain a copy of the non-compete to determine whether the employment will be a violation of the restrictions in the non-compete.

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About Toby K. Henderson

Toby became an SS+D shareholder on January 1, 2006. He joined the firm’s Litigation Department in May 2000 and concentrates his practice in Business and Commercial Litigation, Trade Secret Claims, Antitrust, Health Care Law, Construction Law, and Labor and Employment Law.