Non-compete agreements and other restrictive covenants can have a significant impact on an employee’s career, earning potential, and ability to pursue new opportunities. For employees considering a new job, planning to start a business, or preparing to leave their current employer, these agreements can raise important questions: Can my employer prevent me from working for a competitor? Is my non-compete agreement enforceable? Can my employer sue me if I accept a new job?
Under current Ohio law, the answer generally depends on the language of the agreement, the circumstances surrounding the employment relationship, and the nature of the restriction. Ohio generally permits non-compete agreements, but employers cannot automatically enforce every restriction simply because it bears a signature. Courts evaluate whether the restriction is reasonable and necessary to protect legitimate business interest, rather than merely preventing an employee from competing or earning a living.
Meanwhile, Ohio lawmakers continue to consider legislation that could limit the use of non-compete agreements, including Senate Bill 11 and Senate Bill 301. These proposals reflect growing concerns about the effect restrictive covenants can have on employees’ economic mobility, professional opportunities, and competition in the marketplace.
Since an estimated one in five Americans are subject to noncompete agreements,[1] understanding the current law and the limits of an employer’s ability to enforce a non-compete is essential before making career decisions.
What is a Non-Compete Agreement?
A non-compete agreement is a contractual provision that restricts an employee’s ability to work for a competing business, establish a competing business, or otherwise engage in competitive activity after the employment relationship ends. These provisions may appear in employment agreements, executive compensation arrangements, separation agreements, or other workplace documents. They can apply generally in any industry but are most commonly seen with employees in the sales, healthcare, and technology sectors and for management-level employees broadly.
A non-compete agreement may restrict an employee based on one or more factors, including:
- Time: How long the employee must refrain from competing after leaving the employer.
- Geography: The locations where the employee cannot work or compete.
- Scope of restricted activity: The types of jobs, services, or business covered by the restriction.
The specific language of an agreement is highly relevant. An agreement that prohibits employment with any business that is a “competitor,” for example, may raise different questions from one that narrowly defines the prohibited activities and the relevant competitive market. Broad or ambiguous language can make it difficult for an employee to determine which opportunities are off-limits and may raise questions about whether the restriction is reasonable and enforceable.
Employees should also understand that a non-compete is not the same as a non-solicitation or confidentiality agreement. A non-solicitation provision may restrict an employee from soliciting certain clients or co-workers after departure. A confidentiality agreement generally restricts the use or disclosure of protected information. These provisions raise distinct legal issues, and challenging a non-compete does not necessarily eliminate other contractual obligations.
Can an Unreasonable Non-Compete be Enforced?
An employer cannot simply establish enforceability by pointing to the employee’s signature. Under Ohio law, reasonableness and an employer’s legitimate business interests remain central to this analysis and proposed legislation may have significant impact on these covenants in the future.
Depending on the circumstances, an employee may have grounds to challenge the agreement, dispute the employer’s interpretation, or argue that the restriction should be narrowed. However, employees should be cautious about assuming that an overbroad provision will be disregarded automatically. Ohio courts may modify or “blue pencil” restrictions or find them unenforceable altogether depending on the specific language and other surrounding circumstances.
Significant Changes May Be Coming
Ohio’s legal framework governing noncompete agreements is among the more employer-friendly in the country. By contrast, some states prohibit non-compete agreements for lower-wage workers, while others, such as California, have largely banned them altogether. Recent legislation introduced by Ohio lawmakers, however, could significantly alter the state’s approach to these agreements.
Senate Bill 11, for example, was introduced last year and, as currently proposed, would prohibit employers from entering into non-compete agreements with current or prospective employees and prevent employers from enforcing existing agreements.[2] If enacted, the legislation would represent a substantial departure from existing Ohio law and significantly expand employees’ ability to pursue employment opportunities without the restrictions imposed by non-compete agreements.
Similarly, Senate Bill 301 focuses exclusively on the healthcare sector. As proposed, it would prohibit hospitals from enforcing non-compete agreements against physicians, physician assistants, and advanced practice registered nurses that extend beyond six months after the termination of employment or impose geographic restrictions exceeding fifteen miles from where the individual was employed.[3]
The Bottom Line for Ohio Employees
Non-compete agreements can have lasting consequences for an employee’s career, income, and professional independence. Under current Ohio law, these agreements may be enforceable when they reasonably protect legitimate business interests, but an employer’s ability to restrict future employment is not unlimited.
A signed agreement is not necessarily an enforceable agreement in every respect. Its language, the interests it protects, the hardship it creates, and the circumstances surrounding the employment relationship can all matter. At the same time, employees should not assume that an overbroad restriction will be disregarded automatically or that pending legislation has already changed the law.
Before accepting a new position, starting a competing business, or leaving an employer, employees should carefully review their contractual obligations and consider obtaining legal advice. Understanding the scope and enforceability of a restrictive covenant can help employees protect their rights, avoid unnecessary disputes, and make career decisions with greater confidence.
For more information, or to seek counsel from our Employment practice group, please reach out to request a consultation or call us at 216-696-1422.
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[1] https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes
[2] https://search-prod.lis.state.oh.us/api/v2/general_assembly_136/legislation/sb11/00_IN/pdf/
[3] https://search-prod.lis.state.oh.us/api/v2/general_assembly_136/legislation/sb301/00_IN/pdf/
This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.
