Noncompetes are one of the best tools employers have to prevent the loss of valuable business. While employers use noncompetes to protect themselves, a recent Ohio case reminds them to plan for the future and draft noncompetes that also apply to a successor company in the event of a merger or other change. In Acordia of Ohio v. Fishel, et al., the Ohio Supreme Court considered whether the surviving company of a merger that was not the original contracting employer in a noncompete can enforce the noncompete as if it had stepped into the shoes of the initial employer. The Ohio Supreme Court held that although a merger transfers a noncompete to the surviving company, the noncompete is only enforceable according to its terms, which can lead to unexpected results if not drafted properly.
In Acordia of Ohio v. Fishel, four employees signed noncompetes with an insurance services company that became known as Acordia of Ohio Inc. (Acordia). In the noncompetes, the employees agreed to forgo competition with Acordia for two years after termination of their employment. Significantly, the noncompetes did not contain language that extended to other employers, including the company’s successors or assigns.