Ohio Supreme Court Holds that Employees’ Noncompete Agreements Transfer to Surviving Company after Merger

On October 11, 2012, the Ohio Supreme Court issued a reconsideration of its previous decision concerning employee noncompete agreements after merger.  Acordia of Ohio v. Fishel, 2012-Ohio-4648.  In its initial opinion, the Supreme Court affirmed the judgment of the Court of Appeals and concluded that language found in noncompete agreements precluded the successor company from enforcing the agreements as if it had stepped into the shoes of the original contracting employer.  However, upon motion for reconsideration, the Supreme Court clarified its position and reversed the judgment of the Court of Appeals.

In Acordia of Ohio, the Supreme Court initially focused on the lack of certain language in the noncompete agreements.  Specifically, the Court noted that the agreements did not state that they could be assigned or would carry over to the contracting company’s successors.  Instead, the agreements provided that they would operate only between the employee and the contracting employer.  However, upon reconsideration, the Court concluded that this lack of specificity did not mean that the successor company could not enforce the agreements.  The Court concluded that “[t]he merged company has the ability to enforce noncompete agreements as if the resulting company had stepped into the shoes of the absorbed company.”