Update on Recent Ohio Case Law Provides Guidance on the Enforceability of Non-Compete Agreements and Demonstrates the Need for Precise Drafting in Employee Contracts

non-compete_agreementThis post serves to provide an update on recent case law that provides guidance on the enforceability of non-compete agreements. Recently, the Ohio Fifth District Court of Appeals released a decision that gives employers helpful guidance on the enforceability of employers’ non-compete agreements with former employees. In Saunier v. Stark Truss Co., Inc., a former employee sued to argue that a non-compete covenant in the employee’s separation agreement with the employer was unenforceable.  In Stark Truss, the employee argued that the non-compete was unenforceable because the clause allowed the employer to decide whether the future employment amounted to improper competition. In that case, the employee filed a lawsuit asking for a declaratory judgment and interpretation of the employee’s non-compete agreement with their former employer.

The former employee in Stark Truss, requested a ruling that the employee’s non-compete covenant with his former employer was unenforceable because the employer had sole discretion to decide whether the employee’s new positions violated the non-compete. There, the trial court rejected the employee’s legal challenge and enforced the terms of the non-compete covenant, which the employee voluntarily entered into. The employee then appealed to the Fifth District Court of Appeals, which also rejected the employee’s argument. In rejecting the employee’s argument, the appeals court held that the employer’s discretion to decide whether the employee was violating the non-compete did not make the non-compete unenforceable. Saunier v. Stark Truss Co., 2016-Ohio-3162, ¶16. Rather, the court in Stark Truss held that the non-compete agreement was enforceable under the plain and unambiguous terms to which the parties voluntarily agreed.

The Stark Truss case dispels the myth that non-compete agreements must always be specific and limited in favor of the employee to be enforceable. That said, it is advisable to not have open-ended criteria about what will constitute a violation of a non-compete agreement or non-solicitation agreement. The main takeaway from the Stark Truss case is that the courts are increasingly willing to enforce the unambiguous contract terms that are bargained for between employers and employees.

But, actions to enforce the plain terms of employee restrictive covenants are largely decided by the terms of the underlying agreements. This underscores the need for precise and thoughtful drafting in non-compete or non-solicitation covenants. Unfortunately, we frequently encounter instances where a non-compete covenant or non-solicitation covenant was included in an agreement, however, the covenant contains extremely vague terms. Thus, it bears repeating, that failing to carefully draft non-compete agreements can lead to costly disputes about their reach and enforceability. If you have any questions about the importance of non-compete covenants for your business, or the impact of the Stark Truss case, contact the employment attorneys at Nardone Limited.

Nardone Limited attorneys handle the full spectrum of employment law issues, including providing consulting advice, assistance with separation agreements, conducting internal employer investigations, defending EEOC or other administrative investigations, and handling litigation alleging wrongful termination or other employee claims. If you would like more information on the EEOC or the OCRC, or need advice or representation in an employment dispute, contact one of our employment attorneys.