Make a Indiana Non-Compete Agreement

Applicable State Laws - Ind. Code § 25-22.5-5.5 

Generally speaking, Indiana courts do support non-compete agreements provided that they follow some guidelines. However, a new law has passed (effective on July 1, 2020) states that certain health care professions, specifically Indiana licensed physicians, must include specific provisions for it to be enforceable:

• The employer of the physician must provide the physician a notice that concerns the physician's departure from the employer and was sent to any patient seen or treated by that physician during the two years previous to the termination of the physician's employment or the contract expiration. However, the patient’s name and contact information can be redacted from the copy of the notice given to the physician.
• A provision must be provided by the employer to the physician in good faith to the physician's last known or current contact and location information to a patient who requests updated contact information and location information for the physician and was seen or treated by the physician during the two years before the termination of the physician's employment or the expiration of the contract.
• There must also be a provision that provides the physician with access to or copies of any medical record or copies of any medical record associated with a patient from the previous provisions provided that the patient provides their consent.
• There must be a provision for the physician that allows them to purchase the complete and final release from the terms of the enforceable physician non-compete agreement for a reasonable price. If the physician decides to not exercise the purchase option, the provision cannot be used to restrict, bar, or limit the employer's equitable remedies, including the employer's ability to enforce the physician’s non-compete agreement.
• Any person required to create, copy, or transfer a patient medical record for a reason within the new law may charge a reasonable fee for their service as allowed under applicable state or federal law.

For all other non-compete agreements, businesses must only use the restraint necessary to protect a legitimate interest, such as goodwill, confidential information, customer lists, special training, and their actual process of solicitation of customers. Agreements may not be overboard. Factors to determine reasonableness often include:

• Whether it is reasonably necessary to protect the business
• The effect of the restraint on the former employee
• The effect on public interest

Indiana courts may strike some terms and apply the blue pencil philosophy if contract terms lend themselves to the practice. They may also strike out invalid clauses to leave valid clauses.

Protect your Indiana business by also using an Indiana non-disclosure agreement form. Download an Indiana non-disclosure agreement form now!

How to Write an Indiana Non-Compete Agreement

To write an Indiana non-compete agreement, include the following clauses:

• Purpose. This clause explains the purpose of the non-compete agreement (to protect the confidential information of your business), identifies the parties, and provides the effective date. It may also explain that "confidential information" may also be referred to as "proprietary information."
• Non-compete. This clause explains the restrictions the former employee has on time, geographic area, general and specific business activities, working with general or specific competitors, and employee solicitation.
• Time period. This clause often restates the time restriction and then explains when the time period begins. It may be when the employee or independent contractor begins working for your company or it may be when the employment relationship is terminated.
• Purchase option. This clause explains whether you'll allow the party to buy out the contract. Remember that as of July 1, 2020, physician non-compete agreements are required to have this clause. If your business will allow the other party to buy out the contract, the specific amount must be listed in this clause.
• Jurisdiction. This clause states that Indiana code will govern the agreement.
• Confidential information. This clause states that the term "confidential information" as used throughout the agreement means any and all technical and non-technical information provided by your business and includes, and is not limited to, any data or other proprietary information related to products, inventions, plans, methods, processes, developmental products, experimental products, intellectual property, software, databases, customer lists, vendor lists, supplier lists, marketing methods, reports, business plans, financial information, or other matter related to your business or your clients, customers, consultants, or licensees that is disclosed to the other party under the terms of the non-compete agreement.
• Permitted disclosure. This clause explains when confidential information is no longer considered confidential. Generally, this happens when information becomes public through no fault of the other party, when the information is discovered by the other party without a breach by another party, or when your business provides written consent to disclose specific information to the public.
• Confidentiality. This clause states that the other party acknowledges that the information they may access is confidential and they agree they will not directly or indirectly communicate it to another party without first receiving written consent. They also agree that they may not use the information for any other purpose other than to benefit your business without first receiving the written consent of your business.
• Consultants and employees bound. This clause states that the agreement binds both consultants and employees to keep the information in the strictest of confidence and that they are on a need-to-know basis.
• Return of materials. This clause states that when the agreement is terminated or when your business requests it, the other party must promptly return all documents and other tangible materials that represent the confidential information of your business as well as any copies that exist. It also states that your business will notify the other party in the event that it becomes aware of any loss or unauthorized disclosure of the confidential information.
• Remedies. This clause explains the remedies your business is entitled to pursue under Indiana law in the event the other party breaches the agreement. Examples include the recovery of court costs and reasonable attorney fees, the award by an Indiana court of a temporary restraining order or a preliminary injunction against the unauthorized use of proprietary information, etc., as well as all other remedies available under Indiana law and equity.
• Choice of law. This clause states that the parties choose to have the non-compete governed by the State of Indiana.
• Entire agreement. This clause states that the non-compete may only be amended in writing if the parties both sign the amendment.

The parties should sign and print their names. The signatures should be dated. Additionally, each party should receive a copy of the finalized non-compete agreement for their records.