Are Non Compete Agreements Illegal in Indiana
أكتوبر 1, 2022
● Confidential information or trade secrets: A company`s confidential information or trade secrets may be protected by a non-compete obligation. This type of information may include financial information, marketing strategies, customer information, or other unique approaches that a company uses in conducting its business. ● Maintain business/customer relationships: Businesses thrive on their customers or users. A non-competition clause can be used to protect a company`s relationship with its customers. Former employees may be prohibited from removing customers from a company when they leave the company. Former employees may also be prohibited from referring customers and trying to get them to leave their current business. Indiana courts have also ruled that “goodwill” developed with customers is a protected interest. In an effort to protect their proprietary information and prevent the theft of good employees, Indiana employers are increasingly demanding that their employees sign non-compete agreements. The non-competition clause gives employers a degree of certainty that an employee who has developed considerable skills and acquired valuable knowledge during the course of his or her employment will not leave or compete directly with the company. However, many non-compete obligations are severe and exaggerated, which significantly stifles a person`s ability to move freely within their profession and pursue potential career opportunities. As a result, such agreements are regularly challenged in court. But how can we determine whether a non-compete obligation violates our labour rights? As noted earlier, since the common law regulates non-compete obligations, there are no fixed rules for any of these factors.
However, geographical and permanent restrictions are generally similar within a particular profession and place. For example, a dental practice in a rural town could have a new dentist sign a non-compete clause that includes a 5-year clause within a 20-mile radius that effectively prohibits that new dentist from leaving and starting his or her own practice in the same city. compared to an agreement for an office in a large metropolitan area that lists half a mile and three years. Some employers require certain employees to sign a non-compete agreement, also known as a restrictive duty not to compete. The terms of a non-compete obligation may prohibit employees from doing business with a competitor, starting their own business in the same sector and/or recruiting clients of the former employer. Ultimately, the judge in charge of the case will decide whether the non-compete obligation in question is appropriate. He or she considers a handful of factors when making this decision, such as: On Friday, July 9, 2021, President Biden issued an executive order calling on the Federal Trade Commission (the “FTC”) to prohibit or restrict employers` use of non-compete obligations. The FTC has yet to issue a statement or guidance on this new order, and there is no indication that existing non-compete obligations will be waived by future FTC rules. If you are thinking of making a change for the first time, check with your employer to see if they would voluntarily exempt you from the non-compete obligation.
An employer may not see your new business as a threat to their business and can therefore exempt you completely from the non-compete obligation. In such cases, be sure to ask your employer to document each release in writing. Non-compete obligations are controversial and pit an employer and a former employee against each other, which can lead to tensions between the constitutional right to contract and the non-competition clause and the right to work and earn a living. A non-compete obligation may be enforceable for one person and may not be enforceable for another person. Therefore, it is important to hire a competent and qualified lawyer if you are asked to enter into a non-compete obligation or if you are in the middle of a dispute arising from a non-compete obligation. This blog post was written by lawyers at Ciyou & Dixon, P.C., who deal with the drafting, enforcement and challenge of statewide non-compete obligations and other contract law matters. This blog is written for educational purposes only. They are not intended to provide legal advice or solicitation of services. It is an advertisement. In this article, we discuss Indiana`s non-compete obligations and answer the following questions: In addition, a non-compete obligation must be appropriate in terms of duration, geography, and activity.
Essentially, this means that a non-compete obligation is unlikely to be enforceable if it indicates that it is intended to be effective for 30 years. Similarly, agreements that attempt to prohibit a former worker from competing with a former employee anywhere in the country are less likely to be found to be valid by the court, especially if the employer operates only locally. Most people are familiar with non-compete obligations, whether it`s first-hand or general knowledge you have of a friend or acquaintance. But for those unfamiliar with non-compete obligations, also known as commitments, not to compete, you may be wondering what they are and when they apply? Non-compete obligations can come into play in different areas of life, but this blog focuses on non-compete obligations in employment. The labor lawyers at Beers Mallers Backs & Salin, LLP are there to help draft agreements between a company and its employees that aim to reduce the likelihood that the agreements will be challenged in court. Contact us today for all your employment needs. These contracts are designed to protect confidential information or trade secrets from being shared with other companies. Often, the duration of the non-compete obligation extends beyond the period of employment, which can make it more difficult for the former employee to find a new job in his or her profession that would not constitute a breach of contract. In general, Indiana courts do not view non-compete obligations in a positive light. The employer bears the burden of proof, i.e.
he must prove to the court that the agreement is enforceable. The court may declare a contract totally void or limit both parties to a modified version. Indiana courts will maintain appropriate non-compete obligations. However, there are times when a non-compete obligation can and should be challenged by an employee who has left the company. The main factors that affect the duration and geographic scope of non-compete obligations in Indiana are 1) the current and potential activities of a company and 2) the degree of specialization and knowledge required for the role. A medical sales representative signed a non-compete clause when he joined a medical device company. He then hired a second medical device company as vice president, and then hired several employees from the first company. This violated their previous agreement with the employee. For now, employers should continue to comply with applicable state laws. Indiana allows the use of non-compete obligations in certain circumstances: A non-compete obligation is enforceable if the agreement is intended to protect the reasonable interests of the employer and the agreement is of reasonable scope.
Employers should stay informed of future FTC guidelines. The author thanks articling student Jozie M. Barton for her support in this article. The courts of Indiana will not enforce a non-compete obligation unless its restrictions are reasonably limited in terms of time, activity, and geographic area. Indiana uses the common law, a malleable reasoning system developed by judges and based on case decisions over the years. This means that if the X case has similarities with many non-compete obligations in the past, the judge`s decision will likely follow the conclusion of those earlier cases. This is not to say that a plaintiff or defendant does not have decision-making power in the judge`s decision. Both parties still have the right to present arguments and evidence, but many cases are settled before they have a chance to enter the courtroom. When drafting non-compete obligations that employees can sign, it is important to consider the two-step process mentioned above in case the validity or applicability is questioned by a former employee looking for a job elsewhere. Ensuring that the non-compete obligation is not too broad, has appropriate limits and is clear can help reduce the likelihood that its enforceability will be called into question. However, each case is unique and must be considered independently.
Recently, these “non-competitors” have been receiving negative press and increasingly negative court decisions. Indiana might be ahead of the trend as it has long had a tolerant but cool relationship with these contracts. And late last year, our state Supreme Court again fired a company after declaring its competition code of non-compete unenforceable. Duration: Terms of three to five years are common in the case of non-compete obligations. The more specialized the role and the more specific the knowledge, the longer a non-compete obligation can be enforceable. If an employee has in-depth knowledge of a technology company`s processes, this information can significantly affect the company`s competitive advantage. This scenario also turns into infringements of intellectual property rights. Second, is the scope of the non-compete obligation appropriate? It must be limited in location, time and type of activity. Forcing an employee from some surrounding counties to quit their job completely for a year might be reasonable. But it is easy to imagine an incomplete ban on work in huge periods of time, in vast industries and in vast territories. People have to work, but most of the time, these types of restrictions usually do not protect a reasonable business interest.