Issue link: https://viewer.e-digitaledition.com/i/970884
AS AN OHIO employer, you may well expect that a contract of employment implicitly contains an agreement that the employee will act in good faith and will not act to the detriment of his employer. Within the parameters of that expectation is the notion that, certainly, your existing employees may not compete against you while they are still on the payroll. Well, an Ohio Court is likely to agree with that sentiment, in principle; but, you might be surprised as to what kind of activities are, or are not, found to be included within that prohibition of "competing." That's because, as a point of Ohio law, "preparing to compete" is not the same as "competing." As a result, employers seeking a court order to restrain the activities of an employee, or former employee, can find themselves leaving empty-handed when the only suspi- cious activities carried out by the individual turn out to be not competing, but simply preparing to compete. So what types of things can an employee potentially do while still employed that are not considered "competing?" Courts have found all of the following to be merely "preparing to compete," provided they were not done on company time: + Discussing/planning to set up a com- peting business; + Contacting insurance agents, Realtors, and attorneys in connection with plan- ning to compete; + Creating a new corporation to establish a new competing business; + A r r a n g i n g for f i n a nci n g for t he new business; + Compiling information about pricing, products, and availability of supplies from vendors; + Renting space; + Compiling an inventory to be ready to compete; and + After leaving the company, advising existing customers that the employee had left the company. And, if an employee may do all these things while still accepting a paycheck, it is also worth noting that the law places no obligation on the employee to tell his employer of his intention to compete. This right to "prepare to compete" may also come into play where a covenant not to compete has been executed. Specifically, where a restrictive covenant prohibits "competing," it well may not bar the indi- vidual from preparing to compete. Exactly that occurred in a 2008 case in which the party under contractual restraint formed a compa ny, hired employees, ordered equipment, and ordered supplies, all before the term had expired. Yet, the Court concluded, "[H]e was merely making preparations so that he could commence business the day after the noncompetition agreement expired." At least in part, how a restrictive cov- enant will fare is a function of the precise wording used. For example, a prohibition against "competing" is, literally, not a pro- hibition against "preparing" to compete; and a prohibition against engaging in a competing business does not necessarily include forming a business or investing in a business which will compete in the future. As one Court stated: "the lack of any express reference to the mere for- mation of new business" may be a fatal flaw. Where restrictive covenants are concerned, courts will likely only enforce the terms the parties actually place in the covenant. Stephen Bond is an attorney and Partner with the law firm Brouse McDowell in Cleveland OH. n Can an employee bite the hands BY STEPHEN P. BOND that feed him while they are still feeding him? M D N E W S . C O M /// M D N E W S C L E V E L A N D /A K R O N / C A N T O N ■ M A R C H /A P R I L 2 018 2 1 B U S I N E S S S E C T I O N ❰❰❰❰❰ 2 1