Non-Compete Clauses in Indiana: Enforceability Standards

The General Rule in Indiana

Indiana enforces non-compete agreements but treats them as restraints on trade that are disfavored by the law. Courts apply a strict reasonableness test, and the employer bears the burden of demonstrating that every element of the restriction is justified.

Indiana's Reasonableness Framework

Under Indiana common law, a non-compete is enforceable if:

• The restrictions are reasonably necessary to protect the employer's legitimate business interests
• They are reasonable as to time and geography
• They do not impose undue hardship on the employee
• They are not against the public interest
• The agreement is supported by adequate consideration

The Indiana Court of Appeals has repeatedly emphasized that these covenants are to be strictly construed against the employer.

Duration and Geographic Limits

• Duration: Indiana courts have generally found one to two years reasonable. The case Licocci v. Cardinal Associates affirmed that duration must be proportionate to the interest being protected.
• Geography: Must be limited to the area where the employee had responsibilities or customer contact. Indiana courts have rejected statewide restrictions for employees who worked in a limited territory.

The Blue Pencil Question

Indiana courts have applied a limited blue-pencil doctrine, allowing courts to strike unreasonable provisions without rewriting the agreement. However, they will not add terms or substantially reform an agreement. If a clause is indivisible and overbroad, the court is more likely to void it entirely.

Consideration

For new employees, the employment itself is adequate consideration. Indiana courts have addressed whether continued employment is sufficient for existing employees, and results have varied. Providing additional consideration such as a promotion, raise, or bonus is the safer approach for mid-employment non-competes.

Red Flags

• Restrictions extending beyond two years
• Statewide or broader geographic scope when the employee worked locally
• No clear trade secrets or customer relationships to protect
• Applied to lower-level employees without competitive knowledge
• No additional consideration for existing employees

When to Consult a Lawyer

Consider talking to an Indiana employment attorney if you are weighing a non-compete as part of a job offer, planning to start a competing business, or dealing with an enforcement threat. Indiana's strict construction approach means specific language matters significantly.

This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.