A Primer on Indiana's Covenants Not to Compete

Some case excerpts so that one can get a taste of how Indiana courts approach non-compete agreements.

Covenants not to compete are agreements in restraint of trade, and as such, they are not favored by Indiana courts and are to be narrowly construed. See, e.g., Harvest Ins., supra 492 N.E.2d at 686; American Shippers Supply Co. v. Campbell (1983) Ind.App., 456 N.E.2d 1040. If the restriction is reasonable as to the parties and the general public, it is enforceable and not void as against public policy. Fumo, supra 590 N.E.2d at 1103

This court must look to whether the terms of the covenant "were reasonable with respect to (1) the necessity of the breadth of the protection for the covenantee [Faust]; (2) the restriction upon the covenantor [R. Norlund]; and (3) the public interest." Harvest, supra, 478 N.E.2d at 104. In determining the reasonableness, factors to be considered are the scope of the legitimate business interests of the employer and the geographic and temporal limits on the restraint. See Id.; Licocci v. Cardinal Associates, Inc. (1983) Ind., 445 N.E.2d 556; Miller v. Frankfort Bottle Gas, Inc. (1964) 136 Ind.App. 456, 202 N.E.2d 395.

Consequently, courts have held covenants not to compete valid when they protect an employer's interest in trade secrets, Jenkins v. King (1946) 224 Ind. 164, 65 N.E.2d 121, or other confidential information. Conversely, Indiana courts have held that a covenant not to compete which protects an employer's customer list readily available to the public and not regarded as confidential, American Shippers, supra, 456 N.E.2d at 1040, or general practice that could be observed by anyone, cf. Slisz v. Munzenreider Corp. (1980) Ind.App., 411 N.E.2d 700 (former employee's use of similar advertising techniques and selling similar products), is not valid. In Indiana, the law recognizes a protectable interest in the good will generated between a customer and a business. Licocci, supra, 445 N.E.2d at 556; Miller, supra, 202 N.E.2d at 395; See also Field v. Alexander & Alexander of Indiana, Inc. (1987) Ind.App., 503 N.E.2d 627, trans. denied. That good will may be protected with a covenant not to compete.