Is Your Noncompete Agreement Even Enforceable in Indiana?
2026 Update — Indiana noncompete law has moved faster in the last three years than in the prior twenty. Here’s what’s changed and what hasn’t.
If your business uses noncompete agreements — or you’re thinking about adding them — there’s a question worth asking before you need to enforce one: would a court actually uphold it? Increasingly, the answer depends not just on how the agreement is drafted, but on what industry you’re in and when it was signed.
Indiana courts don’t automatically enforce noncompete agreements just because an employee signed one. In fact, Indiana law starts from the opposite assumption: noncompetes are viewed as restraints on trade, and they’re disfavored unless the employer can show they’re reasonable and necessary. A poorly drafted noncompete can be struck down entirely, meaning the protection you thought you had was never really there.
Here’s what actually determines enforceability under Indiana law today, what business owners get wrong most often, and where the law is headed next.
The Starting Point: Indiana Courts Are Skeptical, Not Friendly
Outside a few specific industries covered by statute (more on that below), Indiana doesn’t have a comprehensive law governing noncompete agreements. Instead, enforceability is shaped by case law, and Indiana courts apply a reasonableness test. That means every noncompete is evaluated on its own facts. There’s no one-size-fits-all template that guarantees enforceability.
The starting presumption is not in the employer’s favor. To enforce a noncompete, an employer generally has to show:
● It has a legitimate, protectable business interest
● The restriction is reasonable in scope — geographically, in duration, and in the type of activity restricted
● The agreement isn’t broader than necessary to protect that interest
Fail any of these, and a court can refuse to enforce the agreement or, in some cases, narrow it to something less restrictive (more on the limits of that below).
What Counts as a "Protectable Business Interest"
Not every business reason for wanting a noncompete qualifies. Indiana courts have long recognized interests like protecting trade secrets and confidential business information, protecting substantial relationships with existing customers, and protecting the goodwill associated with a business, which is the same goodwill analysis the Indiana Supreme Court applied in Central Indiana Podiatry, P.C. v. Krueger, 882 N.E.2d 723 (Ind. 2008).
What doesn’t qualify, generally, is simply not wanting an employee to compete with you. “I don’t want my former employee taking their skills to a competitor” is not, by itself, a protectable interest. Indiana law doesn’t let employers use noncompetes purely to suppress ordinary competition. There has to be something specific worth protecting. For instance, real customer relationships, real confidential information, or comparable business value the employee had access to.
This is the single most common mistake business owners make: assuming that any noncompete they can get an employee to sign will be treated as their business’ private property line. It won’t be, unless it’s tied to something Indiana law recognizes as worth protecting.
What “Reasonable in Scope” Actually Means
Even with a legitimate interest, the restriction itself has to be reasonable across three dimensions:
● Geographic scope. A restriction covering the area where the employee actually worked and had customer contact is more defensible than one covering an entire state or the whole country, unless the business genuinely operates and competes at that scale.
● Duration. Courts generally look more favorably on shorter restrictions — six months to two years is common — than on agreements running three, four, or five years, unless there’s a strong business justification for the longer period.
● Scope of restricted activity. The restriction can’t be broader than necessary to protect the interest at stake. In November 2024, the Indiana Court of Appeals struck down exactly this kind of overbroad clause in Med-1 Solutions, LLC v. Taylor, 247 N.E.3d 1269 (Ind. Ct. App. 2024), rejecting a noncompete that would have barred a former executive from working for a competitor “in any capacity,” including, say, as a janitor or in an unrelated department. The restriction should track what the employee actually did and had access to, not blanket-ban them from the industry.
The “Blue Pencil” Problem
Here’s something many employers don’t realize: if a noncompete is found to be overbroad, Indiana courts don’t necessarily throw the whole thing out. In some cases, a court can apply what’s called the “blue pencil” doctrine. striking the unreasonable parts while leaving the rest intact.
But this isn’t a safety net you should rely on. The Indiana Supreme Court made clear in Heraeus Medical, LLC v. Zimmer, Inc., 135 N.E.3d 150 (Ind. 2019). that the blue pencil works only as an eraser; in other words, a court can delete unreasonable, severable language, but it cannot add or rewrite terms to make an agreement reasonable, even if the contract itself tries to authorize the court to do so. That principle traces back to Dicen v. New Sesco, Inc., 839 N.E.2d 684 (Ind. 2005), where the court refused to rewrite a nationwide restriction into a narrower one. In other words, sloppy drafting that hopes a judge will “fix it later” is a real risk, not a backup plan; rather, if the overbroad language can’t be cleanly deleted, the whole provision falls.
Non-Solicitation Clauses Are Judged Differently
Noncompetes aren’t the only restrictive covenant in play. Non-solicitation clauses, which restrict a former employee from soliciting your customers or employees, are evaluated somewhat differently, and Indiana case law here is less developed than for noncompetes generally. Importantly, Indiana courts have drawn a real distinction between an employee soliciting a former customer or contact, versus that person independently initiating contact and the former employee simply responding. That distinction can determine whether a non-solicitation clause was actually breached at all, which makes precise drafting just as important here as with noncompetes.
Some Noncompetes Are Already Banned by Statute — Not Just Disfavored
Everything above describes the common-law reasonableness test that applies to most Indiana employers. But for two industries, the Indiana legislature has stepped in and taken the question out of courts’ hands almost entirely:
● Physicians and hospitals. Senate Enrolled Act 475, which was effective July 1, 2025, bars noncompete agreements between physicians and hospitals, hospital systems, their parent companies, or affiliated hospital managers. It also caps physician non-solicitation agreements at one year and bars “no-service” agreements and certain training-repayment terms. There are narrow exceptions — for confidentiality/trade-secret provisions, one-year non-solicits that don’t restrict patient relationships, and true sale-of-practice agreements where the physician owns more than 50% of the entity — and agreements signed before July 1, 2025 are grandfathered even if later renewed. See Ind. Code § 25-22.5-5.5.
● Broadcast employees. Ind. Code § 22-2-19, enacted in 2020, voids noncompete agreements for on-air broadcasting employees outright.
The takeaway for Central Indiana employers: before you assume the general reasonableness test in this article is the whole analysis, check whether your industry or your specific employee’s role is already covered by a statute that overrides it. A noncompete that would otherwise be perfectly reasonable can still be void if it falls into one of these carve-outs.
What's Next: A Proposed Statewide Ban and the Federal Rule That Never Took Effect
Two developments worth watching, even though neither changes the law today:
● A broader state ban was proposed, and failed … for now. Senate Bill 132, introduced January 5, 2026, would have voided any noncompete for an employee earning less than $150,000 per year, not just physicians. It died in committee on February 27, 2026, without a vote. It's not law, but it may signal that the Indiana General Assembly’s appetite for restricting noncompetes isn’t limited to healthcare, and similar bills could resurface in future sessions.
● There is no federal noncompete ban. The Federal Trade Commission’s 2024 rule that would have banned most noncompetes nationwide was vacated by a federal court in Ryan LLC v. FTC (N.D. Tex. 2024), the FTC dropped its appeal in 2025, and the rule was formally removed from the federal register in early 2026. This means that noncompetes remain governed entirely by state law. If you’ve heard that “noncompetes are banned now,” that's not accurate in Indiana or federally.
What This Means for Your Business
If you’re relying on a noncompete or non-solicitation agreement, especially one that’s a few years old, or one that was copied from a template rather than drafted for your specific business. It’s worth a second look before you need it in a dispute. The questions to ask:
● Does this agreement protect something Indiana law actually recognizes as protectable?
● Is the geographic scope tied to where the business actually competes?
● Is the duration defensible, or is it longer than it needs to be?
● Does the restricted activity match what the employee actually did — not just their job title?
● Is this employee or industry subject to a statutory ban or cap that overrides the general reasonableness test?
An agreement that fails these questions isn’t a liability waiting to happen. Instead, it’s often a liability that’s already there, just undiscovered until the moment you need to enforce it.
Quick Answers
Are noncompete agreements enforceable in Indiana?
Yes, for most employers. Indiana enforces noncompetes that are reasonable in geographic scope, duration, and restricted activity, and that protect a legitimate business interest. Physician-hospital and broadcast-employee noncompetes are the exceptions because those are barred by statute.
How long can a noncompete last in Indiana?
There’s no statutory cap for most industries, but six months to two years is generally defensible/ Three-plus-year restrictions face much heavier scrutiny absent a strong justification.
Can an Indiana hospital still require physicians to sign a noncompete?
Not for agreements entered on or after July 1, 2025. Senate Enrolled Act 475 bars them, with narrow exceptions for practice sales, confidentiality terms, and short non-solicits. Agreements signed before that date are grandfathered.
Is there a federal law banning noncompetes?
No. The FTC’s proposed nationwide ban was struck down in court and formally withdrawn. Noncompete enforceability is a matter of state law.
DKB LEGAL drafts, reviews, and litigates noncompete and non-solicitation agreements for Central Indiana businesses. If you’re not confident your current agreements would hold up, or you're putting new ones in place, contact DKB LEGAL at 317-709-4242 or Dan@DKBLegal.com for a review.
This post is for general informational purposes only and does not constitute legal advice. Indiana and federal law referenced above are current as of July 2026 and are subject to change; consult counsel before relying on this article for a specific agreement or dispute.
How Much Does a Business Lawyer Cost? Breaking Down Hourly vs. Fixed-Fee Models
"How much is this going to cost me?" is usually the first question a business owner asks before calling a lawyer — and often the reason they don't call at all. Uncertainty about legal fees keeps a lot of Indiana business owners handling things themselves that really shouldn't be handled alone.
The truth is, "how much does a business lawyer cost" doesn't have one answer, because there isn't one billing model. Understanding the differences between hourly and fixed-fee business lawyer pricing can change how you think about when — and how — to bring in legal help.
The Traditional Model: Hourly Billing for Business Lawyers
Most people's mental image of a lawyer's fee is an hourly rate — and for a lot of legal work, that's still how it's billed. Business attorneys' hourly rates vary widely based on experience, location, and the complexity of the matter, but the structure is the same: you're billed for the time spent, in increments, on your matter.
What hourly billing is good for:
• One-off matters with a defined scope — a single contract negotiation, a specific dispute, a one-time transaction
• Situations where the time required is genuinely unpredictable (litigation, for example, where the other side's actions drive much of the timeline)
What makes hourly billing hard for business owners:
• Unpredictability. You often don't know what a matter will ultimately cost until it's over.
• Hesitation to call. Knowing that every email, phone call, and question adds to the bill makes business owners reluctant to ask — which means small issues sometimes go unaddressed until they're bigger ones.
• Misaligned incentives, in theory. Even with an ethical, experienced attorney, hourly billing means the meter runs regardless of outcome — which can make clients feel like they're paying for time rather than results.
Hourly billing isn't inherently bad — it's simply the right tool for some jobs and the wrong one for others.
The Alternative: Fixed-Fee Arrangements for Business Legal Services
A fixed-fee arrangement flips the model: instead of paying for time, you pay an agreed-upon fee — either for a specific project, or as a recurring arrangement for ongoing legal support.
Where fixed fees work well:
• Defined, one-time projects — drafting a specific contract, forming an entity, handling a specific transaction — where the scope of work is knowable in advance
• Ongoing legal relationships — an outside general counsel arrangement, where you pay a predictable monthly or fixed fee for continuous access to legal support, rather than being billed per question or per call
Why business owners tend to prefer it:
• Budget predictability. You know what you're paying, which makes it easier to plan.
• No hesitation to call. Since the fee doesn't change based on how often you reach out, there's no financial disincentive to asking a quick question before it becomes a real problem.
• Alignment with ongoing needs. For a business with recurring legal questions — contracts, employment issues, compliance — a fixed-fee relationship often ends up costing less overall than periodic hourly engagements, while providing far more consistent access.
So Which Model Is Actually Cheaper: Hourly or Fixed-Fee?
It depends on what you're comparing, and it's worth being honest about the tradeoffs rather than assuming one model is always better.
For a single, well-defined matter — say, drafting one contract or resolving one straightforward dispute — hourly billing might come out cheaper if the matter turns out to be simple and quick. But you won't know that in advance, and if the matter turns out to be more involved than expected, the bill grows with it.
For ongoing legal needs — the kind that come up throughout the year, unpredictably, across different issues — a fixed-fee outside general counsel arrangement is usually the more cost-effective and lower-stress option. You're not paying for a full-time in-house salary, but you're also not facing a new, unpredictable bill every time something comes up. And because the fee doesn't change based on call frequency, you're incentivized to actually use the resource — catching small issues early instead of waiting until they're expensive.
The Real Cost to Watch For: The Price of Not Calling a Business Lawyer
The most expensive legal outcomes for small and midsize businesses usually don't come from paying too much for a lawyer — they come from not involving one early enough. A contract with a bad clause that gets signed anyway. A termination handled without a clear paper trail. A noncompete agreement that was never reviewed for enforceability.
Whatever billing model you choose, the real question worth asking isn't just "what does this cost?" — it's "what would it cost me if I didn't have someone to call?" For most growing businesses, the answer to that second question is a lot higher than the fee for either billing model.
Finding the Right Fit for Your Indiana Business
If your legal needs are episodic and well-defined, hourly billing for specific matters may be all you need. If you're finding that legal questions come up regularly — even if not constantly — a fixed-fee outside general counsel relationship is often the more predictable, more usable, and ultimately more cost-effective option for business owners in Carmel, Indianapolis, Fishers, and across Central Indiana.
Frequently Asked Questions About Business Lawyer Costs
How much does a business lawyer cost per hour?
Hourly rates vary based on the attorney's experience, location, and the complexity of your matter, so there's no single number that applies across the board. Ask any business attorney you're considering for their current hourly rate up front, and whether a fixed-fee option exists for your type of matter.
Is a fixed-fee business lawyer cheaper than hourly billing?
It depends on your situation. For a single, well-defined project, hourly billing can come out cheaper if the matter is simple and quick. For ongoing legal needs, a fixed-fee outside general counsel arrangement is usually more predictable, and often more cost-effective over the course of a year.
What is outside general counsel, and how is it priced?
Outside general counsel is a fixed-fee arrangement in which a business pays a predictable monthly or flat fee for ongoing access to legal support, instead of being billed hourly for each call, email, or question.
Do business lawyers in Central Indiana offer flat-fee pricing?
Many do, particularly for well-defined projects like contract drafting or entity formation, and for ongoing outside general counsel relationships. DKB LEGAL offers Outside General Counsel services on a fixed-fee basis for businesses throughout Central Indiana.
DKB LEGAL offers Outside General Counsel services on a fixed-fee or hourly rate basis for Central Indiana businesses that want consistent legal support without hourly billing or the cost of a full-time in-house attorney. If you're trying to figure out which model fits your business, contact DKB LEGAL at 317-709-4242 or Dan@DKBLegal.com — we're happy to walk through the options with you.
In-House Counsel, Outside Counsel, or Neither? A Decision Framework for Growing Businesses
At some point, almost every growing business owner asks the same question: Do I need a lawyer on my team, or can I keep handling legal issues as they come up?
The Three Options for Legal Support, Honestly Assessed
Option 1: No Regular Legal Support
This works well when:
• Your business is early-stage, with simple operations and few contracts
• Your legal exposure is low (you're not managing employees, complex vendor relationships, or regulatory requirements)
• You have the time and knowledge to spot legal risk yourself
This stops working when:
• You realize you don't actually know what you don't know
• A legal issue surfaces that you didn't see coming, because nobody was looking for it
• “I'll just Google it” starts feeling like a real risk instead of a reasonable shortcut
Option 2: Full-Time In-House Counsel
This works well when:
• You have a steady, high volume of legal questions — enough to fill a full-time role
• You need someone physically embedded in daily operations, sitting in on meetings, reviewing every contract before it goes out
• Your budget can support a six-figure salary plus benefits, regardless of how much or how little legal work comes up in a given month
The tradeoff: In-house counsel is a fixed cost. You're paying for a full-time salary whether your legal needs are heavy that month or light. For a business that's still growing — where legal needs might be intense during a fundraising round or an acquisition, then quiet for months — that fixed cost can be hard to justify.
Option 3: Outside General Counsel
• Consistent access to counsel who already knows your business — no re-explaining your company's history and structure every time something comes up
• Cost predictability — a fixed fee instead of a running hourly clock, so you're not hesitant to pick up the phone
• Scalable involvement — light-touch during steady periods, more hands-on during growth, financing, or a dispute
• Broader coverage than a single in-house generalist could typically provide, since an outside firm can draw on deeper experience across contracts, employment, litigation, and transactions
This works well when:
• You have recurring legal needs — contracts, employment questions, compliance — but not enough volume to justify a full-time hire
• You want the security of a real legal relationship without the fixed overhead
• You've been burned once by not having anyone to call, and don't want that to happen again
Not sure which of these three categories fits your business? That's exactly the kind of question worth a quick phone call rather than a guess — contact DKB Legal and we'll help you figure it out, with no obligation either way.
A Simple Way to Decide: 3 Questions to Ask
1. How often do legal questions actually come up in my business? Rarely (a few times a year) → you may still be fine without regular support, but keep an eye on Question 3. Regularly (monthly or more) → you're a strong candidate for outside general counsel. Constantly (daily/weekly, across many issues) → you may be approaching the volume that justifies in-house counsel.
2. What would it cost me if a legal issue went unnoticed? If the honest answer is “not much,” you can afford to wait. If the honest answer is “it could seriously hurt the business” — a bad contract term, a mishandled termination, an unenforceable noncompete — that risk alone often justifies a standing relationship, even before volume does.
3. Do I currently have someone to call when something comes up — and would I actually call them? If the answer is “no” or “I'd probably just wait and hope it resolves itself,” that hesitation is itself a signal. The businesses that get hurt aren't usually the ones with a lawyer on retainer who make an unnecessary call — they're the ones who didn't call at all.
Frequently Asked Questions
What is outside general counsel?
How is outside general counsel different from in-house counsel?
How much does outside general counsel cost?
Is outside general counsel right for my small business?
Let's Figure It Out Together
If you're weighing your options, here's the next step: call 317-709-4242 or email Dan@DKBLegal.com to schedule a no-obligation conversation. We'll talk through your business, your current legal needs, and whether outside general counsel — or something else entirely — makes the most sense for where you are right now.
Changes Looming to Overtime Eligibility
Currently, if you are a salaried employee, earning between $23,660 and $47,476 per year and have some managerial or decision-making authority, you are likely classified as an “exempt” employee, which means that you are not eligible for overtime pay if you work more than 40 hours in week.
However, a new regulation announced today (May 18, 2016) by the White House and the Labor Department may change that before the end of this year. The new regulation, which is set to go into effect on December 1, 2016, would require that most salaried employees earning up to $47,476 per year must now receive time-and-a-half overtime pay when they work more than 40 hours in a week. The previous cutoff for overtime pay, set in 2004, was $23,660.
Employees currently earning annual compensation less than the new threshold will likely experience one of the following changes in their employment: (1) they make more money – if their employers make no changes to base compensation or number of hours worked, many employees will reap the financial benefits of overtime compensation when they work in excess of 40 hours in a week; (2) they may get a raise in base salary – some employers may increase base compensation to an amount that exceeds the new threshold, thereby maintaining the employee’s “exempt” status; (3) they may work fewer hours – the new regulations may cause employers to limit the number of hours affected employees work each week, thereby avoiding the obligation to pay overtime compensation, but this would also result in less overall compensation for workers accustomed to working over 40 hours per week; (4) they may experience no compensation change at all – employers may opt to lower the base salaries of affected employees, such that their overall pay (including base wages and overtime pay) remains roughly unchanged, but employers taking this route can expect unfavorable reactions and increased turnover among affected employees; or (5) they may see a reduction in other employment benefits – employers may seek to offset the increased costs of having to pay overtime compensation by cutting back in other areas.
If you would like more information about overtime compensation or would like more information about the employment and business legal services we offer, please contact Dan Burke at 317.709.4242, or dan@dkblegal.com.
What is the “Blue Pencil” Doctrine?
As noted in previous postings, Indiana courts will enforce reasonable noncompete agreements. But, what happens if parts of a noncompetition agreement are reasonable and others reach too far? In these situations, the court has the ability to use its “blue pencil” to craft a reasonable and enforceable restriction.
How is the “Blue Pencil” Doctrine Applied?
When presented with an overly broad noncompete, a court may apply the blue pencil doctrine if: (1) the covenant is clearly divisible into separate parts; and (2) some of the parts are reasonable and others or not.
As the Indiana Supreme Court has determined, a noncompete agreement is clearly divisible if it is clearly separated into parts. Recently, the Indiana Court of Appeals clarified that the court may not use its blue pencil where the noncompete provision is expressed as an “indiscrete whole.” In other words, the blue pencil should not be used where the noncompete has no “clear separation of terms or clauses that were or could be intended to be excised from the whole without changing the entire meaning and import of the passage.” Clark’s Sales and Service, Inc. v. Smith, 4 N.E.3d 772, 784 (Ind. Ct. App. 2014). In Clark’s Sales, the court refused to apply the blue pencil to “redact sentence fragments from the indivisible whole of each contested paragraph.”
Assuming the noncompete is sufficiently divisible, the court may apply its blue pencil by striking the unreasonable portions and enforcing the remaining reasonable portions. However, when interpreting a noncompete agreement, a court is not allowed to add or modify the language of the agreement – it can only delete divisible, unreasonable parts. This is because permitting a court to add or modify language would subject the parties to an agreement they did not actually make.
What is the State of the “Blue Pencil” Doctrine After Clark’s Sales?
For many years, employers used noncompete agreements to limit competition and minimize employee movement by imposing broad – seemingly absolute – prohibitions on competition, while also including reasonable restrictions that would survive application of the blue pencil.
But, in Clark’s Sales, the court was critical of this practice. In fact, the court labeled this approach “unsavory” and noted that it “leads to great uncertainty in contracting and does not promote good public policy regarding the relationship between employees and employers.” The court was also critical of the in terrorem effect that noncompete agreements can have on current and former employees – that broad noncompete agreements can be used to scare or intimidate employees from pursuing employment or business opportunities. The court reasoned that “Indiana courts will not engage in rewriting the covenant, as ‘the courts need not do for the employer what it should have done in the first place – write a reasonable covenant.’” Indeed, the court admonished that “the consequence to employers for drafting such overreaching contract is that the covenant cannot be enforced at all.”
So, while a noncompete agreement can be a valuable tool for protecting an employer’s business interests, it must be used with great care and precision.
For more information, please contact Dan Burke at dan@dkblegal.com or 317-709-4242.
Agreement Not to Solicit Employees of Former Employer
Indiana law is fairly well developed with respect to the interpretation and enforcement of noncompetition agreements in the employment context. As noted in previous posts [dkblegal.com/new-blog], Indiana courts view noncompete agreements as a restraint on trade but will enforce them if they are reasonable and necessary to protect an employer’s legitimate business interest. On the other hand, restrictive covenants pertaining to the solicitation of employees have not yet received the same degree of judicial attention. Still, the Indiana Court of Appeals has provided some guidance.
In Enhanced Network Solutions Group, Inc. v. Hypersonic Technologies, Inc., the Indiana Court of Appeals concluded that no breach of a non-solicitation agreement occurs where the prospective employee initiates contact and the party bound by the restrictive covenant merely provides requested information, interviews the applicant and ultimately makes an employment offer.
In that case, Enhanced Network Solutions (“ENS”), which was in the business of modifying existing software to meet its clients’ needs, and Hypersonic, a Fort Wayne-based software engineering firm, entered into an agreement containing a non-solicitation provision, which reads (in pertinent part): "During the term of this Agreement and for a period of twelve (12) months from the date of effective date of its termination, unless mutually agreed to in writing otherwise the Parties (including any successor-in-interest or related company) shall refrain from soliciting, inducing, or attempting to solicit or induce, any employee of the other Party in any manner that may be reasonably expected to bring about the termination of said employee."
The parties ultimately terminated their agreement; however, before the relationship ended, Hypersonic posted an opening for an outside sales representative on LinkedIn. Following the termination of the parties’ agreement, Robert Dobson, an employee of ENS, contacted Hypersonic regarding the opening. Shortly thereafter, Hypersonic’s owner and president had a lunch meeting with Mr. Dobson, during which they responded to Mr. Dobson’s requests for information about the open position but did not make an offer at that time. Mr. Dobson continued his dialogue with Hypersonic, applied for the position and received an offer. After hiring Mr. Dobson, Hypersonic filed a declaratory judgment action, asking court to interpret the enforceability of the non-solicitation provision. The trial court issued an order declaring that “Hypersonic did not solicit, induce or attempt to solicit or induce Dobson to terminate his employment with ENS.”
On appeal, the court began its analysis by noting that the agreement contained no definition for the terms “solicit” and “induce.” The court further noted that there was no case law discussing the precise meaning of these terms. Accordingly, the court turned to Black’s Law Dictionary, which defines “solicitation” as the “act or an instance of requesting or seeking to obtain something; a request or petition,” and which defines “inducement” as “the act or process of enticing or persuading another person to take a certain course of action.”
Applying these definitions, the court concluded that Hypersonic had not solicited or induced Mr. Dobson to leave ENS. On the contrary, the court concluded that, by initiating contact with Hypersonic, requesting information and applying for an open position, Mr. Dobson had actually solicited Hypersonic. More importantly, Hypersonic’s conduct, providing requested information and ultimately offering employment, did not constitute solicitation or inducement.
If you would like more information about non-solicitation agreements in Indiana or would like more information about the business and employment legal services we offer, please contact Dan Burke at 317.709.4242, or dan@dkblegal.com.
Are Noncompete Agreements Enforceable in Indiana?
Under Indiana law, covenants not to compete (also known as noncompetition or noncompete agreements) in the employment setting are considered restraints on trade and are generally disfavored by the courts. However, Indiana courts will enforce noncompetition agreements if they are necessary to protect the employer’s business interests and are reasonable in scope. In other words, to be enforceable, a noncompete cannot impose restrictions that are vague or greater than necessary to protect the employer’s legitimate business interests.
The first step in determining enforceability of a noncompete is to determine whether or not the employer has a protectable business interest. In Indiana, protectable interests generally fall into one of two categories: (1) protection of the employer’s confidential or trade secret information, such as financial, marketing, or customer information; and (2) preservation of the employer’s relationships with its customers, including the business “good will” developed over time.
The second step is to weigh the scope of restrictions against the business interests at issue. In short, a noncompete cannot impose restrictions that are broader than necessary to protect the employer’s interests. So what does that mean? It means that an enforceable noncompetition agreement must be clear and be narrowly tailored to protect the employer’s business interests and no more.
A noncompete is more likely to meet this standard if it contains reasonable and precise limitations as to duration and scope of activity.
Although the facts and circumstances of a particular case would have to be considered, noncompete restrictions of up to two years will generally be considered reasonable and, therefore, enforceable.
In terms of the scope of restricted activity, there are generally two paths to consider. First, an employer can impose a geographic restriction, whereby the former employee is restricted from competing within certain geographic areas. However, a geographic limitation may extend only to those areas in which the former employee actually did business on behalf of the employer or within a reasonable distance from the employer’s primary place of business.
Second, an employer may seek to impose a customer-based restrictions (commonly expressed as a non-solicitation provision), whereby the former employee is prohibited from soliciting the employer’s customers. However, customer-based restrictions (or non-solicitation provisions) are generally limited to the employer’s current customers, not past or prospective customers.
An enforceable covenant not to compete must be reasonable with respect to the scope of activity restricted and cannot restrict a former employee from working for a competitor in any capacity. In other words, the agreement cannot restrict activity beyond the scope of the former employee’s employment. For example, a sales representative cannot be restricted from working for a competitor as a janitor or in some other capacity that would not encroach on the former employer’s business interests.
If you have questions, please don’t hesitate to contact me at dan@dkblegal.com or 317-709-4242.
What is a Noncompete Agreement?
Consider this scenario. You’ve just received an e-mail from your company’s top salesperson, informing you that she’s leaving the company and going to work for your competitor. As with most businesses, your company’s existing and repeat customers are its lifeblood. As with most businesses, your company relies on its sales representatives to establish, grow and maintain relationships with its customers. If your sales representatives leave, what’s to stop them from taking your customers along with them? What will prevent them from raiding your company’s other employees? What will keep them from using your company’s confidential information against it?
In most situations, the frustrating answer to these questions is: not much. However, you and your company can largely avoid this all-too-common conundrum and instill a measure of certainty with a carefully crafted covenant not to compete – otherwise known as a noncompete or noncompetition agreement.
Or, consider a different situation. You’ve just started your dream job. It’s the role you’ve been seeking for a long time. But, just as you’re about to get started, you get a letter from your former employer, reminding you that you signed a noncompete agreement when you started your last job. Can they do that? Is that agreement enforceable? Do you tell your new employer about it?
Let’s start with a basic explanation of noncompete agreements under Indiana law. A noncompete is a contract between an employer and its employee. It is designed to protect the employer’s business interests by preventing a former employee from utilizing for his or her own benefit—or for the benefit of a competitor—relationships formed and maintained on behalf of the employer or from confidential information the employee obtained in the course of employment.
Like all contracts, the noncompete must be supported by consideration, which means that there has to be an exchange of value (goods, services, money, promises to perform, etc.) for the contract to be enforceable. As for noncompete agreements, Indiana courts have concluded that continued employment – in other words, the right to come to work the next day – is sufficient consideration from the employer.
There are generally two types of restrictions found in most noncompetition agreements. First, employers may impose geographic restrictions, which prevent the former employee from engaging in competitive activities within certain geographic areas. Second, employers may insist on customer-based restrictions (also known as non-solicitation provisions), which preclude the former employee from engaging in competitive activities with respect to certain of the employer’s customers.
Generally, an employer should consider requiring any employee who is responsible for establishing, maintaining and/or growing customer relationships to sign a noncompete. This certainly includes sales representatives, but it could also include executives, office staff, delivery personnel and many other types of employees. Further, because noncompetition agreements can be coupled with anti-raiding, confidentiality and other important and generally applicable restrictions, employers often find it prudent to insist that all employees sign covenants not to compete.
In my next post, I'll discuss the enforceability of noncompete agreements under Indiana law. In the meantime, if you'd like to discuss implementing noncompete agreements for your company's employees, or if you find yourself confronting a former employer's noncompete agreement, please don't hesitate to contact me at dan@dkblegal.com or 317-709-4242.