Enforceability of Three Year Non-Compete Agreement in Ohio

As dental attorneys in Columbus, Ohio, we advise dentists and dental practices on a variety of matters, including employment issues. We want to ensure that our clients understand the non-compete agreement options available to protect them from unfair competition. A non-compete agreement, commonly referred to as a form of restrictive covenant, is an agreement between an employing dentist or dental practice and an associate dentist that restricts the associate dentist’s practice of dentistry during and after the associate dentist’s employment by the employing dentist.

A non-compete agreement can restrict an associate dentist’s practice with both a time limitation and a geographic area limitation. For example, a geographic area limitation can restrict the location in which an associate dentist can practice after the associate dentist’s employment ends. A time limitation can restrict the associate dentist’s practice of dentistry for a set period of time after the associate dentist’s employment ends.

The enforceability of a non-compete restriction depends on the reasonableness of the restriction. In Ohio, a court may find a non-compete agreement to be reasonable if it: (1) is no stricter than it needs to be to protect the dental practice; (2) does not impose undue hardship on the associate dentist; and (3) does not cause injury to the public. The court will weigh the specific interests of the dental practice, the associate dentist, and the public to determine what is reasonable in each situation. Raimonde v. Van Vlerah, 42 Ohio St. 2d 21 (1976).

In Ohio, a time restriction of two years has been found to be reasonable by several Ohio Appeals Courts. A physician’s two year, five mile non-compete agreement has been upheld by the Ohio Tenth District in Robert W. Clark, M.D., Inc. v. Mt. Carmel Health, 124 Ohio App.3d 308 (10th Dist. 1997) and the Ohio Eighth District in Harris v. University Hospitals of Cleveland, 2002 WL 363593 (8th Dist. 2002). The Ohio Third District upheld a physician’s two year restriction on his practice of medicine within the primary service areas of his former employer in Owusu v. Hope Cancer Center of Northwest Ohio, Inc., 2011 WL 3890516 (3rd Dist. 2011).

Additionally, the Ohio Sixth District Court of Appeals has found a non-compete agreement with a time limitation of three years to be reasonable and enforceable. Wall v. Firelands Radiology, Inc., 106 Ohio App.3d 313 (6th Dist. 1995). In Firelands, a radiologist challenged her three year, twenty mile non-compete agreement with a hospital-based radiology practice as unenforceable. The court found the non-compete agreement to be enforceable as the non-compete was no greater than necessary to protect the contracts the radiology practice had with two local hospitals; the radiologist did not establish an undue hardship to her caused by the non-compete; and there was no injury to the public by preventing her from practicing within the non-compete area, as the radiology practice would continue to provide the same services she provided.

Vince Nardone Comment: When we look to draft or challenge a non-compete, we are going to investigate the business interest that is being protected. For example, if I am protecting the patient relationship with the dentist, then I want to know where the patients are coming from. I can learn the location of each patient by completing a zip-code analysis using the dental software. If the patients are all coming from an area within 5 miles of the dental practice, it is hard to argue that a 20 mile noncompete is reasonable. The same applies to the referral sources for the particular dentist. I will want to know where those referral sources are located, and compare that to the desired geographic area limitation.

Both an employing dental practice and an associate dentist need to thoroughly consider both the time and geographic area restrictions in any non-compete agreement before signing an employment agreement. Understanding what restrictions are in place and what restrictions are reasonable is important to both the employing dental practice and the associate dentist. Time restrictions as long as two or three years may be reasonable and enforceable. It just all depends on your specific facts and circumstances.

Disclaimer:

The content of this blog is provided for general information purposes only.  The blog is not legal advice, does not create an attorney-client relationship and should not be relied upon in making legal decisions.  Actions on legal matters should be taken only upon advice of legal counsel.  Walter | Haverfield LLP does not guarantee the accuracy of information contained in this blog.