In Buffkin v. Glacier Group, - N.E.2d --, 2013 WL 5516472 (Ind. Ct. App. Oct. 7, 2013), the Indiana Court of Appeals reversed a trial court’s order granting a preliminary injunction against a recruiter who was subject to a non-compete covenant.
Buffkin was hired as an independent contractor to work as a “sales recruiter” for Glacier Group, which provides executive or employee recruiting and placement services in the field of information technology (IT). Buffkin essentially worked as a “head hunter in the IT field” for Glacier Group. In 2008, Buffkin and Glacier Group entered into an “Independent Contractor Agreement,” which included a non-compete covenant. In essence, the covenant provided that for a period of three years after Buffkin’s engagement with Glacier Group ended, Buffkin would not “be connected in any way with any business that competes with [Glacier Group] in employee recruitment or performance placement with employers with offices in the continental United States.”
Glacier Group terminated the Independent Contractor Agreement in 2012. After later learning that Buffkin was working as a recruiter in the IT field, Glacier Group filed suit alleging that Buffkin was violating his non-compete covenant. The trial court granted a preliminary injunction enjoining Buffkin from working as a recruiter in the IT field. Buffkin then appealed.
The issue on appeal was whether the trial court’s grant of the preliminary injunction was clearly erroneous. Buffkin argued the trial court’s order granting the injunction should be reversed because the non-compete covenant was unreasonable, that the covenant did not protect a legitimate interest of Glacier Group, and that the restrictions on activity and geographic scope were overly broad.
The Court of Appeals first analyzed whether Glacier Group sufficiently demonstrated a protectable interest served by the non-compete covenant. The Court observed that legitimate protectable interests include “goodwill, including secret or confidential information…and the advantage acquired through representative contact,” as well as “the competitive advantage gained for an employer through personal contacts between employee and customer…” The Court held that, at best, Glacier Group demonstrated a minimal protectable interest. The Court reasoned Glacier Group failed to present evidence that Buffkin knew any trade secret or confidential information belonging to Glacier Group. The Court further reasoned that Glacier Group also failed to show that Buffkin developed relationships with Glacier Group’s customers that would serve as a protectable good will interest.
The Court then considered whether the geographic scope of the non-compete covenant (the continental United States) was reasonable, holding that the scope was overly broad and thus unreasonable. The Court determined that Glacier Group presented insufficient evidence showing that the geographic scope of its business covered the entire United States. It was incumbent on Glacier Group “to present evidence demonstrating it had a legitimate interest to be protected in the relevant markets in which it sought to prohibit Buffkin’s activity...”
Finally, the Court held the non-compete covenant was overly-broad as to the scope of activities it restricted. The covenant restricted Buffkin from being connected “in any way with any business that competes with [Glacier Group]…” The Court reasoned the covenant was overbroad because it prohibited Buffkin from working in any capacity for any competitor.
In summary, because the non-compete covenant served a “minimal” protective interest at best and was overly broad in terms of its geographic scope and the scope of restricted activities, the Court held the covenant was unenforceable and reversed the trial court’s grant of the preliminary injunction.