What Happened: Recently, an Ohio Court of Appeals sent a strong message to employees who violate non-competition agreements, upholding a jury award of approximately $4.5 million, plus nearly $1 million in attorney fees and expenses, in addition to an injunction enforcing a 5 year non-competition period and a 10 year non-solicitation period.
Why is it important? This case is noteworthy because commentators have wondered whether a liquidated damages clause in a non-competition agreement jeopardizes injunctive relief. Century Business Services, Inc. v. Barton emphatically answers "NO," at least for a non-compete entered into in connection with the sale of a business.
This case is also important because it enforced an Ohio choice of law and forum selection provision against Minnesota employees. However, that was based in part on the fact that the non-compete may have been enforceable in Minnesota and that Ohio law was not contrary to the fundamental policy of Minnesota law. In contrast, another recent case, Contech Construction Products v. Blumenstein, declined to enforce an Ohio choice of law provision for an employee in California since most non-competition agreements in California are considered to be contrary to public policy and void.
What You Need to Know: Because of the difficulty of proving actual damages in non-compete cases, employers should consider including a liquidated damages provision in non-compete agreements. Employers should remember, however, that liquidated damages are only enforceable where damages are difficult to determine, and where the liquidated damages are a reasonable estimate of the damages suffered. Also, in this age where companies are allowing more and more employees to work in out-of-state home offices, Contech Construction is an important reminder of the impact that other states' laws can have on an employer's contracts. Non-competes continue to be an unpredictable area of the law, but the Ohio Court of Appeals has given employers something to consider with their endorsement of liquidated damages.