Smart Business Magazine, November 2019

44 Smart Business Cleveland November 2019 INSIGHTS LEGAL AFFAIRS Illegal restrictions Non competes gain popularity but not always enforceability Todays American workforce is more mobile sometimes switching jobs every few years As a result there are more non competition non solicitation and non disclosure agreements or covenants commonly referred to as non competes being established and enforced than ever Once reserved almost exclusively for high level executives with access to trade secrets non competes are commonplace today Nearly 20 percent of American workers are currently bound by some type of non compete agreement Not only do these agreements cause uncertainty for an employee who has intentionally or unintentionally been separated from employment but they also create challenges for those employees prospective new employers who typically dont want to become involved in litigation with the old employer says David Cuppage a principal at McCarthy Lebit Crystal Liffman Co LPA Smart Business spoke with Cuppage about the enforceability of employee non compete agreements What distinguishes an enforceable from an unenforceable non compete Although Ohio courts generally look upon such covenants with skepticism and have cautiously considered and scrutinized them they can be enforced A non compete that imposes unreasonable restrictions upon an employee however will be enforced only to the extent necessary to protect an employers legitimate business interest The covenant is reasonable if the restraint is no greater than is required for the protection of the employer does not impose undue hardship on the employee and is not injurious to the public In non compete cases the future effects of the covenant must be considered Ohio courts generally must determine whether real or long term damage will result to the employers goodwill or to the employers future income because of the operation of the competing business Paramount to enforcement of a non compete is to prevent unfair competition not ordinary competition What happens when enforcement of a non compete prevents ordinary competition There are cases in which a former employer who has no legitimate basis to seek enforcement of a post employment restrictive covenant sends cease and desist letters to an employee or to the employees current employer There are also instances in which a former employer who has failed to pay an employee the consideration called for in the agreement containing the covenant sends a cease and desist letter to the employee or the employees current employer In those cases the questions become is the employee without rights or remedies And must the employee simply wait out the time period set forth in the covenant or engage in competition at the risk of being sued Not necessarily There are several situations in which Ohio courts have ruled against non compete agreements One example is when an employer has ceased its business activity in a particular field and no longer has a legitimate interest in competing in that field Another example is when an employer has failed to pay consideration called for in an employment agreement Other situations may also cause the court to rule in the employees favor What happens if the court rules that the non compete is unfair and unenforceable In these types of cases an employee may decide to go on the offense and seek declaratory and injunctive relief from a court to prevent the former employer from enforcing or attempting to enforce a non compete While irreparable harm must be demonstrated by the employee courts have found that injury to an employees reputation active opposition to an employees attempts at finding gainful employment lost employment opportunities and the need for a severed employee to regain industry stature within a short period of time may constitute irreparable injury This could then justify the issuance of a temporary restraining order and or preliminary injunctive relief that prevents the enforcement or attempted enforcement of an invalid post employment restrictive covenant DAVID CUPPAGE Principal McCarthy Lebit Crystal Liffman Co LPA 216 696 1422 dmc@ mccarthylebit com Insights Legal Affairs is brought to you by McCarthy Lebit Crystal Liffman FOLLOW UP Connect with David before creating an unenforcable non compete Visit mccarthylebit com people david cuppage