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Articles Discussing Restrictive Covenants In Ohio.
Employers sometimes worry whether seeking to enforce their non-competes in some circumstances but not others might preclude enforcement altogether in the future. Not so, says one court. Applying Ohio law, the United States District Court for the Western District of Tennessee, in GCA Services v. ParCou, held in a discovery ruling that information regarding an employer’s selective enforcement of its non-competition agreements is irrelevant to the issue of whether such agreements are enforceable.
An Ohio appeals court recently held that an employee did not breach his non-competition agreement by creating his own business in the same industry as his former employer, despite the fact that the former employee contacted clients of his former employer and began compiling an inventory during his restricted period.
Reconsidering and reversing its own decision, the Ohio Supreme Court now has decided an acquiring company in a merger could enforce employee non-compete agreements as if it had stepped into the shoes of the acquired company despite the absence of clear contract language to that effect. The Court, on May 24, 2012, in Acordia of Ohio L.L.C. v. Fischel (“Acordia I”), had answered that the agreements could not be enforced by the merged entity post-merger. Then, after agreeing on July 25th to take another look at the case, the Court on October 11th reversed its position, explaining it misread an earlier court decision regarding corporate mergers. Slip Opinion No. 2012-Ohio-4648 (“Acordia II”).
In a rare procedural move, the Ohio Supreme Court reconsidered and reversed its May 24, 2012 decision in Acordia of Ohio, L.L.C. v. Fishel, 2012-Ohio-2297 (“Fishel I”). At issue was the enforceability of restrictive covenants in employee noncompete agreements subsequent to a merger. In Fishel I, affirming the decisions of the lower courts, the Ohio Supreme Court held that all assets and property, including employment contracts and agreements, transferred through operation of law to the resulting company post-merger. The merged company, however, was precluded from enforcing its predecessor’s noncompete agreements because the agreements did not contain language that extends to others, such as the company’s “successors or assigns,” and the noncompete agreements had expired as to all the employees involved.
The Ohio Supreme Court has ruled that while non-compete agreements may be transferred by operation of law when two companies merge, the acquiring company may only enforce the agreements against the acquired employees according to the specific terms of the original agreement. Acordia of Ohio, L.L.C. v. Fishel, Slip Op. No. 2012-Ohio-2297 (May 24, 2012).