A recent Indiana Court of Appeals decision, now adds to the existing landscape disfavoring non-competes, barring the enforcement of a two year non-compete against a former in-home health care company’s employee because the clock began ticking over three years prior, when the employee was fired for the first time.
In October of 2009, Nightingale Home Healthcare, Inc. employee, Carey Helmuth, was terminated for his allegedly “substandard work” and “violation of company policies.” The company promptly rehired Helmuth 10 days later. Fast forward three years, and Nightingale again terminated Helmuth’s employment in March of 2012. Shortly thereafter, Helmuth began doing similar “patient advocate” work for Physiocare Home Healthcare LLC, a competitor of Nightingale. Nightingale filed suit, claiming Helmuth had breached the terms of his non-compete agreement. The trial court however, found in favor of Helmuth, finding his non-compete obligations had already expired.
On appeal, Nightingale relied on their contention that Helmuth had only been terminated for 10 days and was quickly reinstated, such that his non-compete, originally signed in 2008, remained in full effect. The court, however, was unpersuaded, finding that absent execution of a new non-compete following Helmuth’s rehiring, the original agreement expired in 2011. Thus, Helmuth was free to work for Physiocare in May 2012.
While the recent decision is not surprising, employers should take the opportunity to assess the validity of all non-competes on file for current and former employees. Employment decisions can sometimes be fluid, but employers are warned that rehired employees, regardless of how short the time frame of their non-employment, should be treated as new hires for all intents and purposes. This is particularly so with regards to non-compete agreements, since the enforceability of such agreements are inextricably tied to the time elapsed since a given employee’s termination.