Not all waivers of noncompete agreements are effective
Employees seeking to avoid a non-compete agreement when ending an employment relationship should ensure that their former employer explicitly releases them from the agreement. Such was the case in Try Hours, Inc. v. Douville, 2013 WL 139584 (Ohio App. 2013). In Try Hours, Inc., the Sixth Appellate District of the Ohio Court of Appeals held that an integration clause within a termination agreement only excluded prior oral agreements and did not supersede a valid, enforceable covenant not to compete.
Try Hours, Inc. (“Try Hours”), an expedited freight company, hired Bryan Douville (“Douville”) as its director of operations on February 24th, 2010. Douville’s employment agreement included, among other provisions, a covenant promising:
For a period of one year after the termination of employment, employee [would] agree that he/she [would] not engage either directly or indirectly, as an employee, investor, shareholder, officer, director or agent of any company which competes with Try Hours…
Try Hours, Inc., 2013 WL 139584, at *2. The agreement went on to define compete as “any company which provides transportation services for hire on an expedited basis as that term is generally understood in the transportation industry.” Id. at *2. The agreement further prohibited Douville from soliciting the employees and customers of Try Hours. Id.
Ultimately, Try Hours decided to terminate Douville’s employment on the basis that he did not fit with the organization. Upon termination, Douville executed a termination agreement that gave him, among other things, back pay for some time and health benefits. The termination agreement also included an integration clause that made null and void any prior oral agreements between the parties about the subject matter of the termination agreement. The termination agreement did not, however, mention the non-compete covenant.
Douville proceeded to work for Premium Freight Management (“PFM”), a competitor, on the assumption that the integration clause of his termination agreement voided the non-compete clause. Upon learning that Douville was employed by PFM, Try Hours filed a lawsuit against both PFM and Douville. Try Hours filed and the trial court later granted a motion for a preliminary injunction seeking to prohibit Douville from violating the non-compete agreement. The court granted the motion on the basis that that the integration clause did not supersede the non-compete clause, and that the non-compete agreement was reasonable and enforceable.
Appealing to Ohio’s Sixth District Court of Appeals, Douville argued that the trial court had erred because the integration clause voided the non-compete agreement, the preliminary injunction was improperly granted, and the non-compete clause was unreasonable and unenforceable. The court, however, did not accept any of the points of error. First, looking to the plain language of the termination agreement, it was clear that the agreement only superseded prior oral agreements, and not the written non-compete agreement. Second, the court was not convinced by the argument advanced by Douvile that because it had not enforced a non-compete agreement against one employee, Try Hours had waived enforcement with respect to him. This reliance on waiver was not appropriate because there was no evidence that a one-time exception to enforcing another agreement mislead Douville into believing Try Hours had waived enforcing the non-compete clause against him.
Finally, the court disagreed with Douville’s argument that the non-compete agreement was unduly harsh. The Court flatly determined that Douville had not shown any evidence that the agreement would prevent him from seeking alternative employment. Douville could, the Court reasoned, find employment with a trucking company outside of the expedited shipping industry. As such, the agreement was reasonable because of the specialized niche that expedited shipping fell under. Prohibiting Douville from working in the expedited shipping industry simply sought to prevent unfair competition that could happen. For example, working for PFM, Douville could utilize his knowledge of Try Hour’s contracted drivers to try to poach them—a legitimate concern in an industry that had a consistent shortage of capable expedited deliver truckers. Accordingly, preventing Douville for a period of one year, as the agreement provided, was not unduly harsh, nor did it harm third-parties or the public interest.
In sum, the court determined that the duration and scope of the non-compete clause was reasonable because it was limited to one year and only applied nationally in the expedited shipping industry. Nothing prevented Douville from finding alternative employment with non-expedited shipping companies. Because Douville only signed an agreement that canceled prior oral agreements, nothing prevented the written non-compete agreement from being enforced.