Confidentiality and Non-Compete Clauses

Thomas R. Yocum, Esq.

Employment agreements often contain confidentiality and non-competition clauses.  Confidentiality provisions obligate the employee to maintain the confidentiality of information and documents obtained through employment that are not generally available to the public.  This restriction prohibits an employee from unfairly using proprietary information for his own benefit or for the benefit of someone else other than the employer.

Even in the absence of a confidentiality clause in an employment agreement, employees have similar restrictions under Uniform Trade Secret Statutes which have been adopted in Ohio (Ohio Revised Code sections 1333.61 to 1333.69).  "Trade Secret" is broadly defined to include valuable information (including listings of names, addresses, and telephone numbers) that is not readily ascertainable by proper means by others who can obtain economic value from the disclosure.  The information must be subject to reasonable efforts to maintain its secrecy.

Improper disclosure of confidential information can have serious consequences resulting in civil liability based both on violation of a confidentiality agreement and violation of the Trade Secret Statutes which provide for recovery of attorney fees and punitive damages (up to three times that amount of actual damages) where there has been a malicious misappropriation.  Liability for "misappropriation" of trade secrets extends to the recipient of the confidential information who has reason to know that the trade secret was acquired by improper means.

Non-competition clauses in employment agreements are enforceable in most States (including Ohio) so long as they are reasonable (including limited to a reasonable period of time and a reasonable geographic area). What is "reasonable" varies depending on the circumstances. One year is commonly utilized. The geographic area tends to track the employer's business footprint. The over-riding consideration is whether the employee would be deprived of the opportunity to work.  The court also weighs the potential harm to the employer and whether the employee was paid a specific consideration in exchange for the agreement not to compete.

Non-competition agreements can be enforced through obtaining an injunction from a court.  A temporary restraining order or preliminary injunction is an expedited procedure for the employer to obtain a court order prohibiting the competing employment in a short period of time.

The laws vary from State to State regarding to what extent non-competition clauses are enforceable.  In some States, such as California, non-competition clauses are void and unenforceable.  An attorney should be consulted to determine to what extent a non-competition clause may be enforceable in a particular jurisdiction.

By: Thomas R. Yocum, Esq., CSI, Managing Member, Benjamin, Yocum & Heather, 513-721-5672