Future Hire and Employment Restraints in Settlement Agreements – Valid?
Settlement agreements in Ohio employment lawsuits often include a provision restricting the employee from applying or working for the defendant in the future. These provisions further often provide that the defendant has the right to terminate the plaintiff if it ever acquires a future employer of the plaintiff.
The U.S. Ninth Circuit Court of Appeals addressed such provisions under California law in Golden v. Cal. Emergency Physicians, No. 12-16514 (9th Cir., Apr. 8, 2015). The parties reached a settlement agreement in open court by which the plaintiff waived his right to employment with the defendant or at any facility that the defendant owned or with which it might provide physician services in the future. A written agreement was prepared but the plaintiff refused to sign. Plaintiff argued that the agreement was void under Section 16600 of the California Business and Professions Code. That section provides that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” In other words, employee non-compete agreements are void in California. The district court ordered enforcement of the agreement, reasoning that the settlement agreement did not prevent the plaintiff from working as a physician and, therefore, was not a non-compete prohibited under Section 16600.
After addressing a jurisdictional question, the appellate court decided that the district court had abused its discretion by limiting the reach of Section 16600 to non-compete agreements. The court decided that Section 16600 is much broader and most likely prohibits agreements whereby a plaintiff waives future employment opportunities. The court remanded the case to the district court for further factual development and consideration.
Unfortunately Ohio does not have a statute on the books akin to California’s Section 16600. In Ohio non-compete agreements are valid if reasonable in geographic and temporal proximity. This means that if the non-compete limits the employee within a reasonable geographic area and only for a reasonable period of time then it is enforceable. One can argue that settlement agreement provisions like the one in Golden are illegal in Ohio if unreasonable. Is there a per se unreasonableness argument to be made? Of course. That is something I will consider doing when the right case comes along.