Employee non-compete agreements are key to many transactions, whether as part of acquisitions, joint ventures, conditions to investments, or the (rarely simple) addition of key employees. This guest post provided by our Labor and Employment Group discusses a very important narrowing of the “blue pencil” doctrine in Indiana relevant to employee non-compete agreements in virtually all contexts.
As the result of an Indiana Court of Appeals’ recent decision, it just became more difficult to enforce employee non-compete agreements in Indiana.
Indiana courts have long held that employment-based restrictive covenants – agreements that prohibit a former employee from competing with a former employer in a defined geographic area for a specified period of time, as well as those that prohibit former employees from contacting, soliciting or servicing the former employer’s customers – are disfavored as restraints on trade. Yet the courts consistently have enforced such covenants if they protect a legitimate business interest of the employer (such as confidential information and trade secrets, customer relationships or business goodwill) and provided they are not overly restrictive on the former employee’s post-employment activities. The breadth of such covenants is evaluated in terms of their geographic scope, the activities that are restricted and the length of time the restrictions apply.
Read the entire article on this change to enforceability of non-compete agreements in Indiana.