Non-Solicitation Agreements in Indiana: Enforceability Rules

Federal law does not directly regulate non-solicitation agreements. The enforceability of restrictive covenants falls primarily to state law under the common law principle that restraints on trade must be reasonable. The Restatement (Second) of Contracts and common law tradition govern the analysis in federal court as well. The National Labor Relations Act (29 U.S.C. § 151) may limit enforcement of non-solicitation agreements in unionized workplaces if they interfere with protected concerted activity or union organizing, but does not establish a baseline rule for private sector non-solicitation agreements generally.

The Federal Trade Commission has proposed rules regarding non-compete clauses that could extend to non-solicitation agreements, but these have not yet become federal law. Enforcement of non-solicitation agreements therefore depends almost entirely on whether the agreement meets the state's reasonableness standard. An agreement that restricts an employee from soliciting customers or employees after separation is lawful at the federal level if it passes the state law reasonableness test. The burden is on the employer to show that the restriction is necessary to protect a legitimate business interest.

Indiana Code § 34-2-2-1 explicitly permits non-solicitation agreements as a type of restrictive covenant. Under Indiana Code § 34-2-2-2, a non-solicitation agreement is enforceable only if it is reasonable with respect to its duration, the area within which it is to be enforced, and the line of business to which it is to be applied. The statute states that a covenant not to solicit customers or employees is reasonable if it is designed to protect the employer's legitimate business interests, such as trade secrets, substantial relationships with prospective or existing customers, or goodwill associated with an ongoing business.

Indiana's approach is notably more employer-friendly than some states. The reasonableness test does not require the employer to prove that the employee had access to confidential information or trade secrets; protection of customer relationships and employee relationships alone can justify a non-solicitation clause. Unlike California, which broadly voids non-competes, Indiana enforces reasonable non-solicitation agreements against both employees and independent contractors.

Indiana courts have held that a non-solicitation agreement need not be part of a broader employment relationship. A standalone agreement can be enforceable if consideration is present (e.g., the employee receives something of value in exchange for signing). However, if the agreement is presented after employment begins without additional consideration, Indiana courts scrutinize it more carefully.

The statute provides that an employer may enforce a non-solicitation agreement against solicitation of customers with whom the employee had contact or about whom the employee had knowledge during employment. This is narrower than some states' approaches and requires a factual connection between the employee's work and the customer. Geographic scope must be reasonable in light of the employer's actual business operations; nationwide or worldwide restrictions are disfavored unless the business genuinely operates at that scale.

Non-solicitation agreements may be unenforceable if they are overly broad in duration, geography, or scope of restricted activity. Indiana courts will void or modify agreements that extend beyond what is necessary to protect legitimate business interests. An agreement restricting solicitation for an indefinite period is presumptively unreasonable and likely unenforceable. Similarly, a restriction that purports to prohibit solicitation of all customers nationwide when the employer operates only regionally will be struck down or reformed.

Unions and collective bargaining may limit enforceability. If the non-solicitation agreement conflicts with rights protected under the National Labor Relations Act—such as the right to solicit for union membership—it may be unenforceable to that extent. Indiana courts recognize that an employee's ability to earn a livelihood cannot be entirely eliminated, so agreements that would effectively prevent the employee from working in their field may be deemed unreasonable.

If an employer breaches the employment contract or engages in wrongful conduct, Indiana courts may refuse to enforce a non-solicitation agreement as a matter of equitable estoppel. Some courts have held that an employer who terminates an employee without cause forfeits the right to enforce a non-solicitation clause, though this principle is not universally applied.

At-will employment does not override non-solicitation agreements; an employee can be at-will while still bound by a valid restrictive covenant. However, if the non-solicitation agreement is unconscionable—meaning it is both procedurally and substantively unfair due to grossly unequal bargaining power—it may fail. Agreements imposed on lower-level employees with take-it-or-leave-it terms have been challenged on unconscionability grounds, though Indiana courts have generally been reluctant to strike agreements on this basis alone.

Step 1: Document all communications and activities related to the alleged breach. Keep copies of emails, text messages, phone records, and any evidence showing that the former employee solicited customers or employees in violation of the agreement. Record the dates of solicitation, the names of customers or employees targeted, and any communications where the agreement was referenced. Document your business records showing which customers the employee had contact with during their employment, to establish that the agreement's geographic or customer scope applied.

Step 2: Review the non-solicitation agreement itself and confirm that it complies with Indiana law. Verify that the duration, geographic scope, and line of business are reasonable under Indiana Code § 34-2-2-2. If the agreement is overbroad, a court may refuse to enforce it or reform it, weakening your legal position. Consult with an employment attorney to assess the enforceability of your specific agreement before taking legal action.

Step 3: Send a cease-and-desist letter to the former employee. This should be drafted by an attorney and should cite the specific non-solicitation agreement, describe the alleged violations, and demand that all solicitation cease immediately. Include a deadline (typically 10–14 days) for compliance. This letter creates a paper trail and may resolve the matter without litigation. If the employee ignores the letter and continues the violation, this strengthens your case for injunctive relief.

Step 4: File a civil lawsuit in Indiana state court (typically in the county where the business operates or the employee resides) if the cease-and-desist does not resolve the issue. Indiana courts can award injunctive relief (a court order stopping the violation) and damages for losses caused by the breach. You must prove that the agreement is reasonable under Indiana law and that the employee violated its specific terms. Be prepared to show evidence of customer or employee contact during the employment period and proof of the unauthorized solicitation.

Step 5: Consult an Indiana employment attorney at the earliest sign of breach. An attorney can assess the strength of your case, advise whether injunctive relief is appropriate (immediate court orders to stop the violation), and represent you in negotiations or litigation. Because the enforceability of non-solicitation agreements depends heavily on the specific facts and the reasonableness test, early legal guidance is critical. Attorneys can also advise on damages calculations and whether settlement is preferable to litigation.