Senator Louis Blessing, III, Republican, and William DeMora, Democrat have introduced Senate Bill 11 which seeks to ban employers from requiring their employees to adhere to non-competes and certain stay or pay provisions.
Primarily, SB 11 will ban non-compete provisions or agreements whereby the employer attempts to impose upon a “worker” either at hire, during employment, or post-employment that:
- Prevents the worker from working for another employer (i) for a specified period of time, (ii) outside a specific geographical area, or (iii) in a capacity similar to the worker’s work for the employer;
- Requires the worker to pay for lost profits, lost goodwill, or liquidated damages because the worker terminates the relationship;
- Imposes a fee or cost on a worker for terminating the work relationship, including a replacement hire fee, a retaining fee, reimbursement for immigration or visa-related costs, or a bondage fee;
- Requires the worker who terminates the work relationship to reimburse the employer for any cost incurred by an employer during the work relationship for training, orientation, evaluation or other service intended to provide the worker with skills to perform the work or improve performance.
The term “worker” is strikingly broad, encompassing any individual that provides “services” to an employer including an employee, independent contractor, extern, intern, volunteer, apprentice, sole proprietor who provides service to a client or customer, and an individual who provides service through a business or non-profit entity or association.
SB 11 is intended to be retroactive, voiding any existing agreement that imposes or attempts to impose these restrictions on a worker if the agreement is still in effect when the bill becomes law.
Additionally, pursuant to SB 11 no employer can require as a condition of employment that a worker who primarily resides in or does business in Ohio must file a claim arising in Ohio in a forum outside of Ohio. That prohibition would not apply in situations where the worker is represented by counsel in negotiating an agreement and agrees to an alternate forum for resolving any claims arising under the agreement.
A worker or prospective worker who is successful in a civil action claiming a violation of SB 11 will be entitled to reasonable attorney fees as well as actual damages and possible punitive damages not exceeding Five Thousand Dollars.
Impact on Employers
Should SB 11 be passed, Ohio will join the approximately 37 states that either restrict non-competes or cripple them. Employers will not only have to review all of their covenants and agreements with employees, interns and volunteers, that seek to restrict competitive activities, or recoup costs of certain benefits paid for workers, such as tuition assistance, but they will also have to scrutinize all of their relationships with all independent contractors such as manufacturer representatives, distributors, and the like that involve a service relationship between the employer and an individual or sole proprietor.
SB 11 still leaves a window for employers to protect their business assets. Although employers may be limited with respect to imposing typical non-competes on workers should SB 11 be passed, it does not foreclose other means employers have to protect their trade secrets and good will. It appears that employers may still avail themselves of confidentiality agreements and non-solicitation agreements that prohibit solicitation of customers and other workers so long as they are not so restrictive as to function as a typical non-compete.
Our Labor & Employment Practice Group will continue to monitor the progression of SB 11 and report back. If you have any questions contact Maribeth Meluch (MM@kjk.com; 614.427.5747).