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Restrictive covenants, contracts may protect company interests

| Jul 20, 2021 | Business Law

Running a business is a risky endeavor, which is why it is essential for business owners to take precautions to protect their companies. Often, owners will implement contracts and agreements that can reduce the chances of a person associated with the company causing issues that may lead to damages. For example, many Ohio business owners may utilize restrictive covenants with their employees.

Restrictive covenants are often included in employment agreements as clauses or as separate agreements altogether. These covenants could prevent an employee from working with a direct competitor for a certain period of time after leaving the company, prevent a worker from taking clients or co-workers with him or her when leaving the company, and prevent workers from disclosing confidential information associated with the company. Of course, these matters must be addressed in the proper agreement and in accordance with state laws.

It is also important to keep in mind that a breach of contract could occur. If so and the matter goes to court, the court will likely work to determine whether the contract was valid by consider the following details:

  • Whether the employee received proper compensation for agreeing to the terms
  • Whether there was reasonable need for the agreement in the first place
  • Whether the restrictions were reasonable regarding the time and geographic area to which it applied
  • Whether the agreement would unreasonably limit a worker from earning a living in the chosen marketplace

If the contracts or covenants are too broad or otherwise did not provide proper compensation to the worker, a court could deem it invalid. Likely, someone accused of a breach of contract will try to argue that the agreement was not valid, and it may be up to the company to prove that it met the legal requirements of a legitimate contract under Ohio state law. Unfortunately, these cases can be difficult, but in the end, they may be worthwhile if companies need to pursue recompense for damages caused by the breach.