On May 9, 2014, Attorney Lisa Wafer secured a favorable judgment for a man who was sued by his former employer, a local automobile accessory installation company. ( Auto Options v. Marion, Case No. 2013-CFV-030978 in Franklin County Municipal Court in Columbus, Ohio)
The employer (plaintiff) filed the lawsuit against the former employee (defendant) after his employment ended with that company and he stared working for a competing business. The plaintiff alleged that this was a violation of the employment contract that Attorney Wafer’s client had signed, in which he agreed not to work for any of the plaintiff’s competitors within six months of his employment.
In the end, the court rejected the plaintiff’s claim and denied the $3,500 in damages it was seeking for training expenses, according to the decision and judgment entry in the case.
The court documents identify the disputed employment contract provision as a “hybrid” of a non-compete clause and a liquidated damages provision. The court found, however, that this particular situation did not meet the legal standards of either type of agreement.
The purpose of a non-compete clause is to prevent a former employee from harming a company by taking its specialized knowledge and trade secrets to a competitor. In order for such a clause to go into effect, it must only use restraints that are reasonably necessary to protect the business interests of the company, according to the court’s decision.
A liquidation damages provision serves a different purpose. This provision allows damages to be awarded to the employer if the employment contract is breached. This only goes into effect for the purposes of compensating the employer, as opposed to penalizing the former employee.
In this case there were a number of factors that led to the court’s decision to rule in the favor of Attorney Wafer’s client. These factors include the following:
- The defendant had not received work from the former employer’s shop for approximately two weeks, which means that he was essentially laid off before he started looking for work at the competing business.
- Preventing the defendant from working for the competing business would cause excessive hardship on the former employee (as he was out of work because of the plaintiff).
- The defendant already possessed certain specialized skills prior to starting his employment with the plaintiff.
- The defendant did not have trade secrets or contacts for clientele that would place the plaintiff at real risk.
- The act of denying the defendant employment at the competing business would do nothing more than to stifle the success or growth of the competitor, which is not a legitimate business interest under a non-compete clause.
- The court identified the $3,500 as a penalty for the former worker and not as compensation, which makes the damages ineligible as liquidated damages.
- The plaintiff claimed the damages for loss of training expenses. However, witnesses stated that only regular on-the-job training was provided.
- The entire employment contract could be considered an adhesion contract. This is due to the fact that the defendant was only given a short amount of time (his lunch hour) to sign the contract. He was told he would not be able to work beyond his lunch hour if he did not sign the document.
While the client’s claims for damages in his countersuit were denied by the court, Attorney Wafer was successful in reaching a favorable judgment in the lawsuit that was filed by the plaintiff. As a result, her client does not have to pay any damages to his previous employer.
The Law Offices of Saia & Piatt, Inc. assists clients in Ohio with many different types of legal and litigation matters. Contact us to learn how we can help with your unique case!