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.