Proposed Ohio Senate bill takes aim at non-compete agreements

Following the demise of the Federal Trade Commission’s proposed national rule to ban non-compete agreements last year, a bi-partisan Senate Bill in Ohio has put the issue back on the table for the Buckeye State.

Ohio Senate Bill 11, sponsored by Senator Louis Blessing (R) – Colerain Township and Senator Bill DeMora (D) – Columbus, proposes to make Ohio the fifth state to institute an outright ban on post-employment non-compete agreements, possibly joining California, Minnesota, Oklahoma, and North Dakota in this distinction.

Specifically, Ohio Senate Bill 11 would render any post-employment non-compete agreement or clause regardless of duration or geographical scope illegal.  The proposed bill would apply to all Ohio employers and the definition of a “worker” under the bill would extend to any “employee, independent contractor, extern, intern, volunteer, apprentice, sole proprietor who provides service to a client or customer …” Thus, the scope of protection offered by the bill would extend to virtually all conceivable categories of employment relationships. 

The proposed bill also offers any aggrieved “worker” or “prospective worker” a private cause of action against his or her employer, with potential damages including actual damages, punitive damages not to exceed $5,000.00, injunctive relief, and attorneys’ fees if the “worker” prevails in the action. Alternatively, under the proposed bill, an affected “worker” or “prospective worker” could file a complaint with the attorney general’s office and be afforded the opportunity for the same remedies available to a “worker” or “prospective worker” who brings a private cause of action.

The bill also proposes restrictions on the following:

•  An agreement requiring the worker to pay for lost profits, lost goodwill, or liquidated damages because the worker terminates the work relationship.
• An agreement that requires a worker to pay a fee for terminating the work relationship with regard to his or her replacement, retraining, or reimbursement for immigration or visa-related costs.
• An agreement that requires a worker who terminates the work relationship to reimburse the employer for expenses incurred by the employer for training, orientation, evaluation, or other service intended to provide the worker with skills for the work he or she is performing.

Of note, the proposed bill does not include any mention or prohibition of a non-solicitation clause regarding clients, customers or employees, or a non-disclosure clause, both of which normally accompany a non-compete restriction in a post-employment agreement. However, the proposed limitation on damages for lost profits, goodwill, and training, as listed above, could operate as a de facto non-solicitation prohibition as these are the types of damages that are normally sought for violations of such clauses.

The trade secret, non-compete and unfair competition team at McDonald Hopkins will update on the progress of this bill as it makes its way through the Ohio legislature. In the meantime, reach out to your McDonald Hopkins attorney with any questions on this pending legislation or restrictive covenant issue.