A significant step in the battle for employees' rights
Last month, the Federal Trade Commission (FTC) announced a proposed regulation that would ban non-compete clauses in employment nationwide. The proposed rule would not only prohibit employers from entering into non-competes with workers going forward, but also require employers to rescind existing non-competes and inform workers that they are no longer bound by these clauses. Notably, the rule also applies to "de facto" non-compete clauses — that is, clauses that, while not technically non-competes, would in effect prevent the worker from working for a competitor, such as extremely broad non-disclosures or requirements that the worker unreasonably repay training costs in order to leave.
If enacted, this rule would be a tremendous step forward for employees' rights. About 30 million workers nationwide are bound by non-competes, and this rule would instantly give them significantly greater leverage and career opportunities. The FTC estimates that wages could increase by nearly $300 billion nationwide.
It remains to be seen whether this proposed rule will actually be enacted and, if so, whether it survives judicial scrutiny. However, whether the federal ban goes through or not, it's important for employees today to understand the protections they have under current law.
Are non-compete clauses enforceable in Ohio?
The short answer to this question is "yes, as long as they're reasonable." Of course, whether a particular non-compete agreement is "reasonable" is up to interpretation. In the context of non-competes, the main criteria for reasonableness are:
- The agreement is no greater than necessary to protect the employer's legitimate interests,
- The agreement does not place an undue hardship on the employee, and
- The agreement is not injurious to the public.
There are quite a few factors Ohio courts can consider when determining whether a non-compete is enforceable, including:
- Duration: Reasonable non-competes should set a finite, reasonable length of time that the agreement applies after the end of employment, such as one year.
- Location: Most non-competes should also be limited to a particular geographic area, such as a 10-mile radius from the employer's place of business. What counts as a reasonable geographic area depends on the nature of the employer's business.
- Access to Confidential Information: Employers have a greater interest in restricting employees who have knowledge of strategies, trade secrets, or confidential information than those who do not.
- Skills: The court can consider whether the skills that the non-compete seeks to restrict were developed during the time of employment or during previous employment.
- Sole Contact: If the employee was the only point of contact for a significant number of clients or customers, a non-compete may be considered more reasonable than if there are multiple contacts.
- Ordinary vs. Unfair Competition: The court can consider whether the non-compete is only meant to prohibit unfair competition or whether it also prohibits ordinary competition in the marketplace.
In our experience, it's quite common for business owners (and even some business lawyers) to draft non-competes as broadly as possible because they think that will give the business the most protection. This means many non-competes are, in fact, not enforceable, or would at least be narrowed in scope by a judge — but only an attorney can tell you whether that's true in your individual case.
If you're dealing with a non-compete, we can help
Our attorneys have extensive experience representing employees in complex situations involving non-compete agreements. Whether you need advice on whether to sign a non-compete or are fighting against an existing non-compete, we would be happy to review the agreement and explain your options. Give us a call or contact us online today for a consultation with Gibson Law LLC.