It is not uncommon for business owners to ask newly hired or even existing employees to sign employment agreements. Often times, the employee is so thrilled to accept the job that they do not take the proper time to read or ask questions about language included in the contract. But such contracts often restrict employees from engaging in certain competitive conduct after separating employment. Generally speaking, there are three types of restrictive covenants that can sometimes be found in employment agreements, summarized below:
• Non-disclosure agreements – An agreement that impedes a terminated employee from sharing information accessed during their employment. A non-disclosure is used to protect “trade secrets,” a legal term of art defined by statute.
• Non-compete agreements – A contract between an employer and employee that states that the employee may not compete with an employer after termination. Non-competes are commonly put into place so that the terminated employee cannot engage in a competing business with their former employer for a specified time within a defined geographic area and to prevent disclosure of trade secrets which can happen when an employee leaves to work for a competitor.
• Non-solicitation agreements – This kind of agreement prohibits a terminated employee from recruiting a co-worker to terminate their employment or soliciting their former customers after leaving the employer.
The Federal Trade Commission (FTC), an agency which regulates fair trade and certain business practices, has recently announced several proposed rules that would ban employers from using these agreements with limited exceptions. However, until the FTC signals otherwise, it is still permissible for Ohio employers to enter into non-compete agreements with their employees provided the restrictions are reasonable between the parties and protect an employer’s legitimate business interests, such as protection of trade secrets or goodwill in the purchase of a business.
If you or your employer have questions about the “reasonableness” of non-compete agreements under Ohio law, please contact the Walter Haverfield Labor & Employment Services or Business Services Group.
Jessica L. MacKeigan is senior counsel at Walter Haverfield who frequently represents employers in labor law and employment matters. She can be reached at email@example.com or 216.928.2928.
Ryan M. Coady is an associate at Walter Haverfield who focuses his practice on representing small to medium-sized clients in a range of business matters. He can be reached at firstname.lastname@example.org or 216.619.7837.