Many employers ask employees to sign noncompete agreements in an attempt to keep them from improperly competing with them after they’ve left the business. However, a noncompete agreement can’t always be enforced.
The enforcement rests in the reasonable nature of the agreement. A noncompete agreement is defined as being reasonable if it is (1) required for the protection of the employer, (2) does not impose undue hardship on the employee, and (3) is not injurious to the public.
The general rule in Ohio is that noncompete agreements that are reasonable can be enforced. Those that are unreasonable, however, may still be enforced to the extent necessary to protect an employer’s legitimate interest.
Courts have the authority and discretion to modify unreasonable agreements. Thus, one of the important components of noncompete agreements is the existence of a legitimate business interest.
Common legitimate business interests are:
* Trade secrets
* Valuable confidential business or professional information
* Substantial relationships with prospective or existing customers, patients, or clients
* Extraordinary or specialized training
Trade secrets are generally any formula, device, pattern or compilation of information that affords a business an advantage over its competitors and that is kept secret through consistent vigilance. Valuable confidential business or professional information refers to documents, videos and other materials which are used in the day-to-day function of the business and are kept secret.
Courts view any training as extraordinary or specialized that is unique and particular to the business and that is not an ordinary, common and widely known practice in the industry. They view client access, involvement and contact that is continuous and business-driven as a business interest.
Noncompete agreements can be an excellent tool to protect a company’s legitimate business interests. However, before one is utilized, these factors and others should be considered. Any business or company considering the use of a non-ompete agreement should consult an attorney. David L. Drechsler practices Buckingham, Doolittle & Burroughs LLP in the Litigation Practice Group. He specializes in commercial, intellectual property and employment-related litigation. He can be reached at (330) 376-5300.
