Ohio Non-Compete Agreement Litigation: Should I Litigate or Negotiate?
October 11th, 2023
A non-compete agreement is a restrictive covenant that allows a company to protect legitimate business interests by restricting a worker's employment activities after an employment relationship ends. To be enforceable, restrictions placed on an employee must be “reasonable.” If you believe a former employee violated a non-compete agreement, your business can negotiate a compromise or file a lawsuit to enforce the terms of the non-compete agreement.
What Is a Non-Compete Agreement?
A non-compete agreement (also known as a non-compete clause, a covenant not to compete, or a non-compete covenant) is a contract or clause in a contract that limits a former employee’s ability to compete with their former employer after the employment relationship ends.
A non-compete agreement is a valuable tool businesses use to keep valuable information private and prevent former employees from using sensitive information like trade secrets, marketing plans, or client lists to start their own business or work for a competitor. Common terms in a non-compete agreement include:
Inability to work for a competitor, often for up to a year after the employment relationship ends
Prohibition on providing products or services that could be considered competitive
No contact with the former employer’s clients, customers, and employees
The period of time the non-compete will be in effect
A geographic scope, often as a mileage radius, in which the former employee cannot compete
A non-compete agreement is an effective tool that can be used to maintain a competitive business advantage. But to be enforceable, a non-compete agreement must adhere to certain guidelines and be fair to all parties involved. In Ohio, a non-compete agreement is usually enforceable for up to one year after the employee-employer relationship has been terminated.
Is the Non-Compete Agreement Enforceable?
Non-compete agreements are generally enforceable in Ohio as long as the terms and conditions of the agreement are “reasonable.” The Ohio Supreme Court identified three factors to determine whether a non-compete agreement is reasonable.
Are the restrictions placed on the employee no greater than what is required to protect the employer’s legitimate business interest?
Does the restriction impose an undue hardship on the employee?
Is the restriction injurious to the public?
When evaluating whether a non-compete agreement is reasonable, courts can also consider:
The timeframe covered by the agreement
The geographical scope of the restrictions
The extent of confidential information accessible to the employee
Whether the agreement seeks to eliminate unfair competition as opposed to regular competition within the market
Whether the advantages for the employer surpass the challenges faced by the employee
Whether enforcing the agreement would hinder the employee's capacity to secure suitable employment
If you believe a former employee is violating the terms of a non-compete agreement, your business can consider negotiating a compromise with the former employee or filing a lawsuit to enforce the terms of the non-compete agreement.
Negotiating Compliance with a Non-Compete Agreement
When a former employee violates a non-compete agreement, negotiating an acceptable compromise might be in everyone’s best interests.
Cease and Desist Letter
A business can send a cease and desist letter reminding the former employee and their new employer of their contractual obligations under the non-compete agreement. A cease and desist letter should warn the former employee that the business plans to take legal action if the employee does not stop violating the non-compete agreement.
A cease and desist letter from a law firm is often sufficient to remind the former employee and their new employer of the employee’s contractual obligations and put a stop to conduct that is impermissible under the agreement.
Identify Competitor Businesses
At the termination of employment, it can be beneficial for an employer to identify businesses it considers a threat so the former employee knows where not to seek employment.
Litigating to Enforce a Non-Compete Agreement
When a business believes a former employee is violating the terms of a non-compete agreement and attempts at negotiation are unsuccessful, the company may have no choice but to file a lawsuit to enforce the terms of the non-compete agreement.
Declaratory Judgment
If the business has not yet suffered financial harm, the employer can file a lawsuit seeking a declaratory judgment to prevent a future breach and damage to the company.
Filing a Lawsuit for Damages and Injunctive Relief
If the business has suffered financial harm, it can file a lawsuit seeking an injunction to stop the former employee from violating the terms of the non-compete and monetary damages for any financial harm the business has suffered.
RKPT: Cost-Effective Solutions to Protect Your Business
When a former employee violates the terms of a non-compete agreement, your business must decide whether and how to enforce the terms of the agreement. The commercial litigation attorneys at RKPT can help you evaluate your options and identify cost-effective ways to protect your business.
RKPT has been serving clients throughout the Midwest and Florida since 1965. Our lawyers take a client-centric approach to our legal representation and tailor our strategies to meet the needs of our clients. Our lawyers have the skill, experience, and expertise to strategically protect your company and will work to identify practical solutions to solve your business problems.
To learn more, contact us today to schedule a confidential consultation to discuss your situation and how we can help.
