Ohio: Recent Employer-Friendly Developments on Employment Agreements
Author: Melissa A. Silver, XpertHR Legal Editor
Two recent developments regarding employment agreements are favorable to Ohio employers.
First, effective September 28, 2012, +2011 OH S.B. 224 reduces the statute of limitations in which an employee can assert a claim against an employer based on a written employment agreement or contract from 15 years to eight years. This should provide some relief to employers that the amount of time that they could be exposed to a lawsuit or claim arising from the written contract has been reduced by nearly half.
Senate Bill 224 also applies retroactively, meaning that actions that accrued prior to the effective date have a limitations period of eight years from the effective date of this act or the expiration of the period of limitations in effect as of date of the act (15 years), whichever occurs first.
This law benefits employers when defending against breach of contract claims because there will be a greater likelihood of witness availability, witnesses will have fresher memories, and document accessibility will be increased.
Second, the Ohio Supreme Court reversed its May 24, 2012 decision in Acordia of Ohio, LLC v. Fisher, et al., +2012 Ohio LEXIS 1360 and has now ruled that employee noncompete agreements transfer to a surviving company after a merger has been completed. See Acordia of Ohio, LLC v. Fisher, et al., +2012 Ohio LEXIS 2454 (Ohio October 11, 2012). The Supreme Court of Ohio decided that a merged company has the ability to enforce noncompete agreements "as if the resulting company had stepped into the shoes of the absorbed company." Most importantly, it was also held in Acordia that that the omission of a successors or assignment clause did not prevent Acordia from enforcing the noncompete agreements.
Successor employers should be aware, however, that as with all noncompete agreements in Ohio, employees still have the ability to challenge the validity of the noncompete agreements based on whether they are reasonable. Additionally, employees can also challenge the agreement based on whether the merger created additional obligations or duties so that the agreement should not be enforced on its original terms.
Although the reasonableness of a noncompete agreement remains an open question, this decision provides comfort to successor employers that want to protect their competitive interests post-merger.