New Ohio Appellate Decision Endorses Voiding – Rather Than “Blue Penciling” – Overbroad Non-Compete Restrictions Thumbnail

New Ohio Appellate Decision Endorses Voiding – Rather Than “Blue Penciling” – Overbroad Non-Compete Restrictions

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Ohio employers with plans to enforce non-compete agreements may have to think again in light of a recent Ohio Appellate Court decision. In Kross Acquisition Co. v. Groundworks Ohio, 2024-Ohio-592, the Court of Appeals upheld a lower court’s refusal to enforce an agreement barring a former Kross employee from competing against Kross and soliciting its customers. The lower court reached this decision even though the employee admittedly went to work for a competitor and took on job duties and a sales territory that directly overlapped with those he had at Kross. The basis for the court’s refusal to enforce the agreement was that the agreement was overly broad because it barred the employee from working anywhere in Ohio and Kentucky, though his sales territory at Kross only covered portions of those states.
The Kross case is particularly notable because the lower court could have modified the agreement and enforced a narrower scope of restrictions. For example, the court could have enforced the agreement to the extent it barred the employee from competing against Kross in his former Kross sales territory. Though this type of rewriting agreements – or “blue penciling” – is something that Ohio courts customarily do, the lower court refused to so and simply found the agreement unenforceable as a whole. On review, the Court of Appeals agreed, finding that the bedrock case in Ohio for evaluating non-compete agreements, Raimonde v. Van Blerah, did not require blue penciling.  Rather, a court can simply void the restrictions if there are too many factors and considerations necessary to easily rewrite the agreement.
The decision is significant because it gives trial courts the leeway to simply refuse to enforce agreements they consider unreasonable, rather than rewriting them.  The case serves as a stark reminder that it is paramount, when preparing non-compete and non-solicitation restrictions, to carefully consider the legitimate business interests a company is trying to protect, and to closely marry the restrictions to those interests.   
For more information on these best practices on restrictive covenants, contact Chris Koehler or any other member of the Frantz Ward Labor & Employment Law Practice Group.

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