It stands to reason that, if you have a business, you need to take steps to protect your business interests. For example, courts recognize trade secrets, confidential information, customer lists, pricing methods, sales, and marketing strategies as legitimate business interests worthy of protection. One way to protect your business interests is to have an attorney draft a non-compete agreement. But, before you go down that road, make sure there is a legitimate need for one. Recently, there is a movement away from upholding non-competes and so if you chose to have one drafted, make sure your lawyer does it the right way.
A non-compete is a private contract between employer and employee in which the employee agrees to restrictions on his or her ability to engage in activities that compete with employer during or after their employment.
To be enforceable, the Ohio law has adopted a rule of reasonableness. Simply stated, the non-compete must be reasonable:
- No greater that necessary to protect a legitimate business interest.
- And, it does not impose undue hardship.
To be valid, a non-compete must be “reasonable” in:
- Scope- the geographical area that it covers. If the “business interest” you are trying to protect is your customer lists and you operate in Columbus, Ohio, then the non-compete should only be for Columbus and surrounding areas.
- Duration- typically 3 years following employment is the maximum allowed by courts.
- Content- you have to define what you are protecting in the non-compete. Not everything is protectable, and the more narrowly defined the more likely the chances are that the Court will find the non-compete reasonable.
A good lawyer will help you recognize that not everything is a protectible business interest. You and your lawyer should discuss what, exactly, you will provide or expose an employee to that would benefit a competitor or cause competitive harm to your business.
The key to drafting successful non-competes is being able to identify the protectible business interest and then drafting the non-compete specifically around protecting just that legitimate business interest.
Three questions a good lawyer should ask:
- Will the employee have access to truly confidential information?
- Will the employee have access to customers or customer information?
- Will the employer be teaching the employee significant new skills?
Non-competes are just one way to safeguard your business interests. Other less imposing options include non-solicitation and confidentiality agreements. It is best to have a lawyer help you analyze what interest you are protecting and draft the appropriate documents to best serve your purpose.