When considering non-competition agreements, Indiana courts weigh two competing policies:freedom of parties to contract and freedom of trade.A February 5, 2009 Indiana Court of Appeals decision, addressed non-competition agreements in employment contracts. While the case involves doctors, it is nonetheless a good illustration of what to think about as you consider non-competition agreements for your employees.
In Mercho-Roushdi-Shoemaker-Dilley Thoraco Vascular Corporation v. James W. Blatchford III, M.D. and Eve G. Cieutat, M.D., 84A01-0801-CV-30, a medical clinic in Terre Haute spent eight years and several million dollars establishing a practice before bringing Drs. Blatchford and Cieutat in from out of state.Drs. Blatchford and Cieutat later left the clinic to start their own cardiovascular practice and the clinic sued to enforce the non-competition agreement signed by the doctors.
In reaching its decision, the Court stated that noncompetition agreements must be reasonable to be enforceable.In determining reasonableness, the Court examined:
·The Employer’s investment in their business -- Employers spend considerable time, effort and money developing a business. A business owner’s investment in infrastructure, specialized training, customer relationships and confidential information can be protected.
·The Employee’s right to earn a living – An employee has a right to earn a living.The employer bears the burden of showing that the agreement is reasonable in scope as to the time, activities and geographic area restricted.
·The impact of enforcing the agreement on the public – Restrictions cannot negatively impact the public.Restrictive covenants affecting certain professional specialties are rigorously scrutinized so as not to deprive the public of a qualified practitioner.
Ultimately the court found for Drs. Blatchford and Cieutat on public policy grounds.However, a properly drafted non-competition agreement can protect the investment you have made in your business.
