A recent opinion from Ohio’s Eighth District Court of Appeals demonstrates vividly how courts will freely rewrite non-competition and non-solicitation covenants to ensure that they are not overbroad. The opinion serves as a good reminder that restrictive covenants must be drafted to protect legitimate business interests
, rather than to simply keep an employee from working for a competitor.
In MetroHealth System v. Khandelwal
, a burn unit physician left his position with plaintiff MetroHealth for a position at Akron General Hospital’s Burn Unit, and MetroHealth sought to enforce restrictions on his employment with the competing hospital and on his solicitation of patients from MetroHealth. The agreement’s restrictions were to last two years. After a preliminary injunction hearing, the trial court modified the restrictions. First, it permitted the doctor to practice with Akron General, declining to keep him out of work. Second, it reduced the restrictions on non-solicitation from two years to one, finding the shorter period sufficient to protect MetroHealth’s interests. The court’s modification of the covenants, which was upheld on appeal, demonstrates the proactive approach the majority of courts in Ohio – and many courts outside Ohio – take in these cases, and provides guidance for companies on drafting enforceable agreements:
- Courts will freely modify restrictions and agreements so that any restrictions are reasonable.
- Courts will insist that restrictions only protect legitimate business interests of the former employer. A restriction that hampers ordinary competition, rather than unfair competition, is not likely to be upheld.
- Courts are wary of keeping people out of the workforce, particularly in the current employment climate.
- Courts will reduce time periods of restrictions if longer than necessary to protect the former employer’s business interests.
As this case demonstrates, the trend is for courts to more closely scrutinize non-competition restrictions that completely prevent an employee from working in the same industry. Courts are more likely to allow the employee to work for a competitor, provided he or she doesn’t unfairly capitalize on the confidential information or commercial relationships of the former employer. In short, the trend is for courts to give more leeway to non-solicitation restrictions than to non-compete restrictions.
If you have questions about this or other Litigation issues, contact Chris Koehler
or another member of the Frantz Ward Litigation Practice Group.