Court Opinion

ID: 9779664
Source: CourtListenerOpinion
Date Created: 2023-08-30 00:31:53.554821+00
Date Added: 2024-06-11T07:33:37.466617
License: Public Domain

KIRSCH, Judge,
dissenting.
I respectfully dissent.
Covenants not to compete in employment contracts are in restraint of trade and have long been disfavored in the law. See Donahue v. Permacel Tape Corp., 234 Ind. 398, 127 N.E.2d 235 (1955). To be enforceable, the scope of the restriction on competition in a covenant not to compete in an employment contract must be reasonable in terms of duration, activity and geographic area. Sharvelle v. Magnante, 836 N.E.2d 432, 436 (Ind.Ct.App.2005). I believe the covenant now before us fails to meet this standard in terms of both activity and geographic area.
The covenant provides:
... Employee shall not, directly or indirectly:
(i) in any capacity whatsoever, either as an individual or as a partner or joint venture, or as an employee or agent or representative for any person or business enterprise or as an officer, director, shareholder (having more than a nominal investment) or otherwise engage in competition with the Employer, or any of them, in the manufacture, marketing, leasing, distribution, or sale of products in, or services related to, heaters or heating or air conditioning systems and related parts and components markets in any of the states listed on Exhibit A attached hereto.
Appellant’s App. at 36 (emphasis added).
The purpose of the covenant here at issue is not to protect the employer’s trade or business secrets. Rather, its purpose is solely to prevent competition by restricting the employee from engaging in competition with employer “in any capacity whatsoever” and would prevent the employee from competing in any way with the employer. Included in the prohibited actions is owning stock in any company engaged in the heating and air conditioning business. This would include owning stock as an *922investor. Also prohibited would be working in manufacturing in any heating and air conditioning business even though the employee never worked for employer in manufacturing.
In regard to geographic scope, the restriction applied to all states in which the employer does or has done business, without regard to whether the employee has ever had any involvement in such states. While the trial court invoked the blue pencil doctrine to exclude thirteen of the thirty-two states listed on the exhibit because the employee had had no contact with businesses in such states, there was no showing of the extent of employees involvement in the remaining states.
I also question the re-writing of a contract as a matter of policy. A restrictive covenant in an employment contract is to be strictly construed against the employer. See Central Ind. Podiatry, P.C v. Krueger, 882 N.E.2d 723, 728-29 (Ind.2008). The restrictive covenants will be unenforceable if they are unreasonable in scope as to duration, activity and geographic area. Id. Here, as a result of re-writing the employer’s contract by the trial court, a contract that is unreasonable in its scope and unenforceable as over-broad becomes enforceable against the employee.
I believe that the restrictive covenant is unenforceable in its entirety. I would reverse the trial court and remand with instructions to dissolve the preliminary injunction.