Page is loading...
Print Logo Logo

Ohio Supreme Court Reverses Self on Noncompete in Merger Situation

Bill Nolan

William A. Nolan

Columbus Managing Partner

Earlier this year, the Ohio Supreme Court surprised observers in the Acordia of Ohio LLC v. Fishel case by holding that an acquiring company in a statutory merger could not enforce noncompetes entered into with the acquired company by employees who continued to be employed absent clear contractual agreement to that. Today, the Court in effect reversed itself, coming back into line with the great majority of the states. 

Historically, in a corporate merger where the acquirer buys a company in its entirety, the acquirer steps into the shoes of the acquired company with respect to all contractual obligations. The old company becomes part of the new company. (This is different than an asset purchase situation, where the acquirer buys only specified assets of the target company.) Courts to have addressed whether noncompete agreements are, like virtually all other contracts of the acquired company, enforceability by the acquirer have almost uniformly held that the acquirer does in fact step into the shoes of the old company and can enforce the agreements. Thus, what is now being called Acordia I (today's decision will be Acordia II) came as a surprise to most observers of the Ohio Supreme Court and of noncompete law generally. In an unusual move, the court agreed to reconsider Acordia I, so today's “correction” does not come as a surprise.

The key language in the majority decision is, “The language in Acordia I stating that the [acquirer] could not enforce the employees’ noncompete agreements as if it had stepped into the original contracting company's shoes or that the agreements must contain 'successors and assigns' language in order for the [acquirer] to enforce the agreements was erroneous.” While this decision comes as somewhat of a relief, it should not be viewed as diminishing the importance to companies of considering the enforceability of their noncompetes in future corporate transitions. Companies should also not confuse this situation as applying to asset purchases, where the rules are much different.

In short, companies should have a brief conversation with their experienced employment counsel about where they stand with respect to the issues raised in this important case.


12 Days of Handbook Updates: Non-Competes

December 20, 2023 | Labor and Employment, High Stakes Employment Issues, Non-competes and Trade Secrets

Labor Board’s Top Lawyer Declares Most Non-Compete Agreements Violate Labor Law

June 1, 2023 | Labor and Employment, National Labor Relations Board, Federal Laws and Legislation

Crosshairs: Labor Board Targets Gig Economy, Non-Compete Agreements, and More

July 26, 2022 | Labor and Employment, National Labor Relations Board


Do you want to receive more valuable insights directly in your inbox? Visit our subscription center and let us know what you're interested in learning more about.

View Subscription Center
Trending Connect
We use cookies on this site to enhance your user experience. By clicking any link on this page you are giving your consent for us to use cookies.