ALP: Are Non-Compete Agreements Valid in Ohio?

June, 2004
Business Courier

Yes. On March 15, 2004, in the case of Lake Land Employment Group of Akron, LLC v. Columber, the Ohio Supreme Court again confirmed that Ohio has long recognized the validity of agreements that restrict competition by an ex-employee if the agreement contains reasonable geographical and temporal restrictions. The specific issue in Lake Land was whether continued employment was sufficient legal consideration to form a binding non-compete agreement. The employee in that case began his at-will employment with Lake Land in 1988. In September 1991, his employer asked him to sign a non-competition agreement. The employee signed the agreement, and several years later, he terminated his employment and formed a company that competed with his employer. His employer filed suit to enforce the non-competition agreement. The employee admitted that he had signed the non-compete agreement and that his new business would be competing with his former employer, but he argued that the non-compete agreement was unenforceable because it lacked consideration.

The court decided that legal consideration exists to support a non-competition agreement when, in exchange for the assent of an at-will employee to a proffered non-competition agreement, the employer continues an at-will employment relationship that could be legally terminated without cause.

In Ohio, non-compete agreements that are reasonable are enforced, and those that are unreasonable are enforced to the extent necessary to protect an employer's legitimate business interests. Ohio courts have upheld non-compete agreements that prohibit an ex-employee from working for a competitor for up to three years following termination of employment. In terms of geographic scope, courts more and more are analyzing the geographic "market" where the competitors compete to determine if the stated geographic scope of the non-compete agreement is reasonable. Thus, while a hair stylist’s "market" is most likely local (i.e. a particular city or county), many companies today market their products and services in a much wider area, often resulting in a nationwide or even a worldwide market. Courts today have become more willing to accept the realities of modern day business and recognize that an ex-employee may unfairly compete with his or her former employer in a very wide geographic market, depending upon the location of clients and potential clients and the defined market for the company’s products and services.

Practices

Top