Monday, January 31, 2011

Not every employee needs a noncompete

Noncompetition agreements are fabulous tools. They protect employer’s trade secrets and other confidential and proprietary information, customers, goodwill, and special training and skills your employees acquire at your expense. But, not every employee is worthy of locking down with such an agreement.

For example, consider Mark Philips Salon & Spa v. Blessing (Ohio Ct. App. 1/28/11) [pdf]. The salon hired Blessing as a hair stylist. Blessing signed a noncompetition agreement on her first day of employment. When she resigned to accept a position at a competing salon less than five miles away, she got sued. Even though Blessing admitted that she violated the agreement by soliciting former customers, the court of appeals concluded that it was unreasonable for the salon to enforce the agreement against her:

Blessing testified that she was an experienced hair dresser and had worked for two other salons previous to her employment with MPS. Blessing brought approximately thirty clients with her to MPS, and while there she acquired approximately twenty more. Blessing testified that virtually all of her clients are obtained through referrals from other clients, and there is no evidence that MPS did anything that benefitted Blessing in obtaining any of her clients. Blessing also testified that MPS gave her no particular training or skill that she uses…. Blessing testified that after she left MPS she created a list of all her former clients “from my brain, from my knowledge.” There is no evidence that she obtained that information from a database or list maintained by MPS.

By engaging in competition with MPS as she has, and especially by mailing solicitations to clients she obtained while employed by MPS, Blessing violated her agreement with MPS in those respects. However, on this record there is nothing in the competition with MPS in which Blessing has engaged that makes it unfair. Blessing uses no trade secrets or competitive advantages she obtained from MPS. The competition MPS seeks to prevent is merely ordinary competition. Therefore, the covenant not to compete cannot be enforced.

What lessons can employers learn from this case? Noncompetition agreements are wonderful tools that all employers should have in their shed. Employers, however, should use narrowly drafted noncompetition agreements that only reach those legitimate interests worthy of protection. And, if there is no such interest, consider foregoing an agreement at all. Otherwise, you might end up spending lots of money in court in a vain attempt to enforce an unenforceable contract.

Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or