[T]he enforceability of a covenant not to compete depends on its "reasonableness."
Lewis v. Surgery & Gynecology, Inc.
Plaintiff, an osteopathic surgeon specializing in urological surgery, was hired by defendant corporation, which comprised every osteopathic surgeon and gynecologist in the county. The contract stated that plaintiff would become an associate physician until he was invited to become a partner. It also stated that he would only work for the company, that he would not practice medicine in the City of Columbus or the mostly-overlapping county for two years after his termination for any reason, and that all of his records and files would be exclusively the company's property.
After working there for 4½ years, the plaintiff learned that he would not be made a partner but that he could continue working there as an associate. He was also told that he could be transferred, but that it was in his best interest to seek employment elsewhere.
He therefore terminated his employment and opened a practice across the street, in violation of the non-compete agreement. He filed this suit for declaratory relief stating that the clause was unenforceable. Defendant counter-claimed for enforcement and for damages for his breaches of the various clauses.
Defendant moved for a preliminary injunction to stop defendant from competing during the trial, which was denied.
The common pleas court held that an injunction was not needed because defendant could be made whole by damages in the event of a breach. It eventually then held that the evidence as to money damages was speculative at best and ruled in plaintiff's favor.
Was the non-compete agreement valid?
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"A covenant restraining an employee from competing with his former employer upon termination of employment is reasonable if the restraint is no greater than is required for the protection of the employer, does not impose undue hardship on the employee, and is not injurious to the public."
In determining whether a non-compete is reasonable, the following factors should also be considered:
- Whether there are time and space limitations
- Whether the employee is the only contact with the customer
- Whether the employee has trade secrets
- Whether it tries to stop competition would be unfair to the employer or ordinary competition
- Whether it seeks to stifle the inherent skill and experience of the employee
- Whether the benefit to the employer is disproportional to the detriment to the employee
- Whether it operates as a bar to the employee's sole means of support
- Whether the employee's talent was developed during the period of employment
- Whether the forbidden employment is merely incidental to the main employment
If it is unreasonable, courts can fashion a reasonable non-compete.
Here, plaintiff was trained before working for defendant, his ability to attract patients is not enhanced by trade secrets he got while working for defendant, the covenant seeks to eliminate ordinary competition, it places more burdens on plaintiff than it gives benefits to defendant, it is not needed for defendant, and its absence would not cause any real or long-term damage to defendant.
Additionally, plaintiff's daughter is electively mute and is just starting to speak in school for the first time this year. To remove her by making plaintiff move would be a hardship to her. Plaintiff also did try to find other employment, but the offer he found was withdrawn because of bad recommendation from a shareholder of defendant's.
Defendant's calculation of damages was the amount that plaintiff had made off patients that used to be patients of defendant. However, this is speculative because it assumes that all those patients would continue to go to defendant if plaintiff stopped practicing in the county. It also did not subtract the amount that defendant would have had to pay plaintiff if he was still working for it.
An injunction cannot be enforced because defendant cannot demand its enforcement while interfering with plaintiff's attempts to find employment.
Defendant's claimed damages are speculative.