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Friday, January 28, 2005

That's one expensive head hunter

A federal jury in Columbus, Ohio awarded Chicago Title Insurance Co. $43.2 million after it ruled that its former employee, aided by rival First American Title Insurance Co., violated an non compete agreement and recruited 32 employees to join him.

Columbus Dispatch story here (paid supscription required).

Los Angeles Times story here (free registration required).

So, those little old non-compete agreements you signed when you first joined the company can really have some teeth behind them. Here's how Ohio views them.

With respect to non-compete agreements, the Ohio Supreme Court holds the following:

We hold that a covenant not to compete which imposes unreasonable restrictions upon an employee will be enforced to the extent necessary to protect the employer's legitimate interests. A covenant restraining an employee from competing with his former employer upon termination of employment is reasonable if it is no greater than is required for the protection of the employer, does not impose undue hardship on the employee, and is not injurious to the public. Courts are empowered to modify or amend employment agreements to achieve such results. Raimonde v. VanVlerah (1975), 42 Ohio St.2d 21, 325 N.E.2d 544.

With respect to whether a non-compete is reasonable, the court in Busch v. Premier Integrated Med. Assocs., Ltd. (PDF) (September 5, 2003), 2003 Ohio App. LEXIS 4255, 2003 Ohio 4709, stated the following:

We have held that factors to be considered in determining reasonableness of the restrictions a covenant imposes include[:]

(1) the existence of time and geographic limitations;

(2) whether the employee represents the sole contact with the customer;

(3) whether the employee possesses confidential information or trade secrets;

(4) whether the covenant seeks to eliminate competition which would be unfair to the employer or merely seeks to eliminate ordinary competition;

(5) whether the covenant seeks to stifle the inherent skill and experience of the employee;

(6) whether the benefit to the employer is disproportional to the detriment to the employee;

(7) whether the covenant operates as a bar to the employee's sole means of support;

(8) whether the employee's talent which the employer seeks to restrict was actually developed during the period of employment; and

(9) whether the forbidden employment is merely incidental to the main employment.


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