Employee Non-Compete Agreement and Enforceability Memo — Indiana

INDIANA Employee Non-Compete Agreement and Enforceability Memo

Quick-Reference Summary

PART A — ENFORCEABILITY MEMO

MEMORANDUM

TO: [CLIENT / EMPLOYER]
FROM: [ATTORNEY]
DATE: [__/__/____]
RE: Enforceability of Employee Non-Competition Agreement Under Indiana Law
PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / WORK PRODUCT

I. Executive Summary

Indiana enforces non-competition agreements under a strict common-law reasonableness test. Indiana law has two distinctive features that drive drafting: (1) strict construction against the employer (covenants in restraint of trade are disfavored), and (2) the blue-pencil doctrine as articulated in Heraeus Medical, LLC v. Zimmer, Inc., 135 N.E.3d 150 (Ind. 2019) — courts may erase unreasonable divisible language but cannot add or rewrite terms, even if the agreement purports to authorize judicial reformation. Overbroad clauses that cannot be cured by simple excision are void. Drafting must therefore be conservative, severable, and built with step-down fallbacks.

II. Reasonableness Test

A non-compete is enforceable under Indiana common law only if reasonable. Burk v. Heritage Food Serv. Equip., Inc., 737 N.E.2d 803, 811 (Ind. Ct. App. 2000). The court considers:

1. Legitimate Protectable Interest: The employer must demonstrate a legitimate interest in protecting trade secrets, confidential information, goodwill, customer relationships, or specialized training. Mere prohibition of "ordinary competition" is insufficient.

2. Reasonable Geographic Scope: Limited to the area in which the employer has goodwill or where the employee actually had material contact with customers or access to protectable interests.

3. Reasonable Duration: Indiana courts routinely uphold one-year restrictions; two-year restrictions can be enforceable on adequate factual showings; periods exceeding two years require strong justification.

4. Reasonable Activity Scope: Restricted activities must correspond to the services the employee actually performed and the legitimate interests sought to be protected.

III. Blue-Pencil Doctrine — Heraeus Medical (2019)

In Heraeus Medical, the Indiana Supreme Court reaffirmed that the blue pencil is "really an eraser":

• Courts may strike divisible, unreasonable portions of a restrictive covenant.
• Courts may not add, change, or rearrange terms.
• A contractual "reformation clause" purporting to authorize judicial rewriting does not expand judicial authority. Parties cannot delegate to courts the task of drafting reasonable agreements.
• A covenant cannot be blue-penciled if there is no severable, divisible language to excise.

The Heraeus covenant — a non-solicit barring solicitation of "any individual employed by" the company — was void because it could not be narrowed by erasure alone. A non-solicit that targets only employees who possess protectable knowledge will fare better.

IV. Consideration

• New hires: Initial offer of employment is sufficient consideration.
• Mid-employment: Continued at-will employment is generally sufficient under Indiana law, but additional consideration (bonus, raise, promotion, equity, severance commitment) materially strengthens enforceability and is recommended.

V. Customer and Employee Non-Solicits

• Customer non-solicits: Enforceable when tailored to customers with whom the employee had material contact or about whom the employee had confidential information. Burk permits limited blue-penciling. Prospective-customer restrictions are enforceable if the employee had specific contact or access to confidential information about the prospects.
• Employee non-solicits: Must be tailored to employees who possess protectable knowledge or relationships — "any employee" language is facially overbroad (Heraeus).

VI. Physician Non-Competes — Ind. Code § 25-22.5-5.5

For physicians (effective July 1, 2020; amended 2023), the agreement must:

1. Provide a written notice to patients of the physician's new contact information;
2. Allow patients to access their medical records;
3. Include a buy-out provision specifying a reasonable price; AND
4. Be in writing with specified contents.

For physician non-competes entered on or after July 1, 2023, additional restrictions apply where the physician is terminated without cause or where the practice is acquired. Verify current statute before use.

VII. Trade Secrets

The Indiana Uniform Trade Secrets Act, Ind. Code § 24-2-3-1 et seq., provides parallel protection for confidential information independent of contract.

VIII. Choice of Law

Indiana courts generally enforce choice-of-law clauses if (a) the chosen jurisdiction has a substantial relationship to the parties or transaction, and (b) enforcement does not violate Indiana public policy. For employees who reside and work in Indiana, expect Indiana law to apply.

IX. FTC Non-Compete Rule Status

Vacated nationwide by Ryan LLC v. FTC (N.D. Tex. Aug. 20, 2024). FTC abandoned appeal Sept. 5, 2025. Not in effect.

X. Drafting Recommendations

☐ Draft each restrictive covenant as a separate, severable clause.
☐ Use step-down provisions (e.g., "12 months; if unenforceable, then 9 months; then 6 months") so a court can blue-pencil down to reasonable.
☐ Tailor geographic and customer restrictions to the employee's actual footprint and contacts in the last 12–24 months.
☐ Narrow employee non-solicits to employees with protectable knowledge or material customer relationships.
☐ Provide additional consideration for mid-employment agreements.
☐ Pair with Indiana-law NDA and assignment of inventions.
☐ For physicians: confirm § 25-22.5-5.5 patient-notice and buy-out compliance.

PART B — NON-COMPETE AGREEMENT

THIS NON-COMPETE AGREEMENT (this "Agreement") is entered into as of [__/__/____] (the "Effective Date"),

by and between:

EMPLOYER:
Name: [________________________________]
Address: [________________________________]
City/State/ZIP: [________________________________]
(the "Company")

and

EMPLOYEE:
Name: [________________________________]
Address: [________________________________]
City/State/ZIP: [________________________________]
Position: [________________________________]
(the "Employee")

RECITALS

WHEREAS, the Company is engaged in the business of [________________________________] (the "Business");

WHEREAS, Employee will have or has had access to the Company's trade secrets, Confidential Information, and customer relationships that constitute legitimate protectable interests;

WHEREAS, this Agreement is intended to comply with Indiana common law on restrictive covenants, including Heraeus Medical v. Zimmer;

NOW, THEREFORE, in consideration of the mutual promises herein, the Parties agree as follows:

SECTION 1 — DEFINITIONS

1.1 "Confidential Information" means non-public, proprietary, or trade-secret information of the Company, including customer lists, pricing, business strategies, financial data, technical data, vendor terms, and employee information. Consistent with Ind. Code § 24-2-3-1 et seq.

1.2 "Customer" means any person or entity that (a) was a customer of the Company during the [____]-month period preceding Employee's termination AND (b) with whom Employee had material contact OR about whom Employee had access to Confidential Information.

1.3 "Restricted Period" means the period commencing on Employee's cessation of employment for any reason and continuing for [twelve (12) months] (with step-down fallbacks per Section 5).

1.4 "Geographic Area" means:

☐ Option A — Named Territory: [Specific counties/states] [________________________________]
☐ Option B — Radius: A [____]-mile radius from the Company's [office location] [________________________________]
☐ Option C — Customer-Based: The geographic area in which Employee provided services or had Customer contact during the [____] months preceding termination

1.5 "Restricted Activities" means engaging in services for a Competing Business that are substantially similar to the services Employee performed for the Company during the [____] months preceding termination.

1.6 "Competing Business" means any business that provides [products/services substantially similar to] [________________________________] within the Geographic Area.

SECTION 2 — COVENANTS (DIVISIBLE)

DRAFTER'S NOTE — DIVISIBILITY: Each subsection below is a separate, severable covenant. If any subsection is held unenforceable, the remaining subsections remain in full force and effect. This structure is essential under Heraeus Medical v. Zimmer: Indiana courts will not rewrite a covenant; they will only erase divisible unreasonable terms.

2.1 Non-Competition. During the Restricted Period, Employee shall not engage in the Restricted Activities for a Competing Business within the Geographic Area.

2.2 Customer Non-Solicitation. During the Restricted Period, Employee shall not directly or indirectly solicit, divert, or accept business from any Customer.

2.3 Employee Non-Solicitation (Narrow). During the Restricted Period, Employee shall not directly or indirectly solicit for employment any employee of the Company who, during the 12 months preceding Employee's termination, (a) possessed access to the Company's Confidential Information; OR (b) held a position with material customer-relationship responsibility.

DRAFTER'S NOTE: § 2.3 is intentionally narrow per Heraeus Medical. A broad "any employee" non-solicit is void under Indiana law.

2.4 Confidentiality. Employee shall not disclose or use Confidential Information for any purpose other than the Company's business, during or after employment.

SECTION 3 — CONSIDERATION

☐ New Hire: The Company's offer of employment is sufficient consideration.

☐ Mid-Employment: Employee receives the following additional consideration in exchange for this Agreement: [________________________________] (e.g., signing bonus of $[____], salary increase, equity grant, promotion, severance commitment, specialized training).

SECTION 4 — LEGITIMATE PROTECTABLE INTERESTS

The Company has legitimate protectable interests in (a) trade secrets and Confidential Information; (b) customer goodwill and relationships; (c) specialized training; and (d) workforce stability with respect to key personnel.

SECTION 5 — BLUE-PENCIL SEVERABILITY AND STEP-DOWNS

5.1 Severability. Each covenant in Section 2, and each geographic, durational, and activity component of each covenant, is intended to be severable and independently enforceable.

5.2 Step-Down Duration. If a court determines the Restricted Period of 12 months is unenforceable, the Parties intend the period to be 9 months, then 6 months, then 3 months, in descending order, with each shorter period enforceable as a stand-alone, divisible covenant.

5.3 Step-Down Geography. If a court determines the Geographic Area is unenforceable, the Parties intend the geographic scope to fall back, in order, to:

• (a) The state of Indiana; then
• (b) The counties of [________________________________]; then
• (c) A [____]-mile radius from [________________________________].

5.4 Blue-Pencil Acknowledgment. The Parties acknowledge that under Indiana law (Heraeus Medical, LLC v. Zimmer, Inc., 135 N.E.3d 150 (Ind. 2019)), a court has authority only to excise divisible unreasonable language; the court may not add, rewrite, or rearrange terms. The step-downs in Sections 5.2 and 5.3 are drafted as independent, divisible alternatives that the court may enforce by erasing the longer/broader options.

SECTION 6 — REMEDIES

6.1 Employee acknowledges that breach would cause irreparable harm; the Company is entitled to seek temporary, preliminary, and permanent injunctive relief without the necessity of proving actual damages or posting bond (to the extent allowed by law).

6.2 The prevailing Party in any action to enforce this Agreement is entitled to recover reasonable attorneys' fees and costs.

SECTION 7 — GENERAL

7.1 Governing Law. Indiana law governs without regard to conflicts principles.

7.2 Forum. The state and federal courts located in [____ County], Indiana have exclusive jurisdiction.

7.3 Entire Agreement; Amendment. This Agreement is the entire agreement on its subject and may be amended only in a writing signed by both Parties.

7.4 Assignment. The Company may assign to successors or affiliates; Employee may not assign.

SIGNATURES

COMPANY:

EMPLOYEE:

PART C — PRE-SIGNING CHECKLIST

☐ Confirmed Employee actually has access to trade secrets, Confidential Information, or material customer relationships (legitimate protectable interest documented).
☐ Restricted Period limited to 12 months or less (or compelling justification documented for longer).
☐ Geographic Area tailored to Employee's actual footprint or customer contacts in last 12–24 months.
☐ Restricted Activities limited to services Employee actually performed in last 12–24 months.
☐ Each covenant drafted as a separate, severable clause.
☐ Step-down provisions for duration and geography included (Section 5).
☐ Employee non-solicit narrowly tailored to employees with protectable knowledge (NOT "any employee").
☐ For mid-employment agreement: additional consideration documented (bonus, raise, equity, promotion).
☐ Indiana choice of law and venue.
☐ Paired with Indiana-law NDA and invention assignment.
☐ If Employee is a physician: separate § 25-22.5-5.5 compliance review (patient notice, buy-out, written contents).
☐ Copy delivered to Employee for records.

Sources and References

• Heraeus Medical, LLC v. Zimmer, Inc., 135 N.E.3d 150 (Ind. 2019) — Indiana Supreme Court opinion via Justia
• Burk v. Heritage Food Service Equipment, Inc., 737 N.E.2d 803 (Ind. Ct. App. 2000) — Justia
• Ind. Code § 25-22.5-5.5 (Physician Non-Compete Statute) — Indiana General Assembly
• Indiana Uniform Trade Secrets Act, Ind. Code § 24-2-3 — Indiana General Assembly
• Ogletree Deakins, "Indiana Supreme Court Reaffirms That the Blue Pencil Doctrine Is an 'Eraser'" — ogletree.com
• Ryan LLC v. FTC, No. 3:24-cv-00986 (N.D. Tex. Aug. 20, 2024) — FTC press release on appeal abandonment

This template is provided for informational purposes only and does not constitute legal advice. Indiana enforces non-competes only when reasonable and applies the blue-pencil doctrine strictly as an "eraser" — courts will not rewrite overbroad provisions. Customize and review with an Indiana-licensed attorney before use.

Prepared for use on ezel.ai — a legal template platform for solo and small-firm practitioners.