Subject: Analysis of Senate Bill 11 regarding agreements restraining lawful professions or businesses after employment. Sponsors: Senators Blessing, DeMora; Cosponsor: Senator Smith
Summary:
Ohio Senate Bill 11 aims to protect workers by prohibiting employers from using agreements that restrict their ability to seek or accept work or operate a business after their employment concludes. The bill targets non-compete clauses, repayment agreements for training or other expenses, and forum selection/choice of law provisions that disadvantage workers. It provides avenues for workers to seek legal recourse, including civil action and complaints to the Attorney General and Director of Commerce.
Key Provisions and Themes:
- Prohibition of Restrictive Agreements: The core of the bill lies in prohibiting employers from enforcing agreements that prevent workers from seeking or accepting work after leaving their employment. This includes:
- Non-compete agreements (“An agreement that the worker will not work for another employer for a specified period of time, not work in a specified geographical area, or not work for another employer in a capacity similar to the worker’s work for the employer”).
- Agreements requiring workers to pay for lost profits or liquidated damages upon termination (“An agreement that requires the worker to pay for lost profits, lost goodwill, or liquidated damages because the worker terminates the work relationship”).
- Fees or costs associated with terminating employment (“An agreement that imposes a fee or cost on a worker for terminating the work relationship, including a replacement hire fee, a retraining fee, reimbursement for immigration or visa-related costs, or bondage fee”).
- Agreements requiring reimbursement for employer-provided training or orientation (“An agreement that requires a worker who terminates the work relationship to reimburse the employer for an expense incurred by the employer during the relationship for training, orientation, evaluation, or other service intended to provide the worker with skills to perform the work or to improve performance”).
- Definition of “Worker”: The bill provides a broad definition of “worker” to include not only employees but also independent contractors, interns, volunteers, apprentices, sole proprietors, and individuals providing services through business entities. This wide net is crucial for protecting various types of workers. “(B)(1) ‘Worker’ means an individual who provides services for an employer. (2) ‘Worker’ includes an employee, independent contractor, extern, intern, volunteer, apprentice, sole proprietor who provides service to a client or customer, and an individual who provides service through a business or nonprofit entity or association.”
- Void Agreements: Any agreement entered into, modified, or extended after the effective date of the bill that violates these provisions is declared void (“An agreement, or part of an agreement, between an employer and worker entered into, modified, or extended on or after the effective date of this section that is prohibited under division (A) of this section is void”).
- Forum Selection and Choice of Law: The bill restricts employers from requiring workers who primarily reside and do business in Ohio to adjudicate claims outside of Ohio or to be deprived of Ohio’s legal protections. However, this provision does not apply if the worker is individually represented by legal counsel and has the option to designate the venue or choice of law.
- Enforcement and Remedies: Workers and prospective workers can bring civil actions against employers who violate the chapter and can be awarded costs, attorney’s fees, actual damages, punitive damages (up to $5,000), and injunctive relief. The Attorney General and the Director of Commerce are also empowered to investigate complaints and bring actions on behalf of workers.
- Exceptions: The bill does not prevent debt forgiveness or benefit provisions after a specified period of employment, nor does it limit loan repayment assistance programs.
Important Considerations:
- Effective Date: The bill’s provisions apply to agreements entered into, modified, or extended after the effective date of the legislation.
- Legal Counsel Exception: The forum selection and choice of law restrictions do not apply when the worker is individually represented by counsel and has the option to choose the venue or governing law. However, this exception is limited: “For purposes of this division, a worker is not individually represented by legal counsel if the counsel is paid for by, or was selected based on the suggestion of, the employer.”
- Coordination between Agencies: The bill mandates a written agreement between the Attorney General and the Director of Commerce to coordinate responsibilities regarding enforcement.
Potential Impacts:
- Reduced Employer Power: The bill aims to level the playing field between employers and workers by limiting the use of restrictive agreements that can hinder career advancement and economic opportunity.
- Increased Worker Mobility: By invalidating non-competes and similar clauses, the bill could facilitate greater labor mobility and competition.
- Increased Litigation: The bill may lead to an increase in litigation as workers and the Attorney General seek to enforce its provisions.
- Impact on Business Practices: Employers may need to re-evaluate their employment agreements and business practices to ensure compliance with the new law.
Conclusion:
Ohio Senate Bill 11 represents a significant effort to protect workers’ rights and promote fair labor practices. By restricting the use of non-compete agreements and other restrictive clauses, the bill could have a positive impact on worker mobility, career opportunities, and economic growth in Ohio. However, the bill also includes exceptions and requires careful implementation to ensure its effectiveness.