Are Covenants Not to Compete Really Enforceable?

READER’S QUESTION:  Are Covenants Not to Compete Really Enforceable?

MATT’S ANSWER:  Yes.  In most states.  In Indiana for sure.  In most cases.  If “reasonable.”

 

 There is a huge misperception that covenants not to compete (“restrictive covenants”) are unenforceable.  I hear that all the time.

Where do people get such bad legal information so often?

Restrictive covenants are enforceable in Indiana and many other states, if “reasonable.”  The courts have defined “reasonable” to mean limited: (1) in the time or duration of the restrictive period; (2) in the geographic range or area and (3) to activities likely to protect a legitimate business asset or interest.  So, for example, if a truck parts salesman with inside “secret” knowledge of customer needs, pricing strategies, new marketing strategies, costing, etc. quits his job to work for a competitor, a restrictive covenant of 18 months in the same sales territories would probably be enforceable.

Restrictive covenants are even more important and easier to get approved in court, when a business owner sells to or merges with another business.  In those situations, the buyer wants to know that he is the only person or company that will have access to the business assets (information, data, documents, etc.) that is being purchased.  The courts are much more likely to enforce a restrictive covenant in these situations.

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CHECK OUT OTHER ARTICLES I’VE WRITTEN ON IMPORTANT BUSINESS, REAL ESTATE AND LAW-RELATED MATTERS:   http://indiana-attorneys.com/articles_news/index.htm

 

 

One thought on “Are Covenants Not to Compete Really Enforceable?

  1. Pingback: A Question About Non-Compete Agreements | Ask Matt Online

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