The Indiana Court of Appeals determined in an unpublished opinion that an employer presented a prima facie case that a five-year restriction in a non-compete agreement was reasonable. Mayne v O’Bannon Publishing Co., 36 IER Cases 279 (Ind. Ct. App. 2013). Elizabeth Mayne operated a small commercial printing business in Louisville, Kentucky for some time and decided to close the business and accept employment with O’Bannon Publishing Co. just across the Ohio River in Southern Indiana. O’Bannon did not purchase Mayne’s business, but it did purchase at least one printing press from her and paid her a commission, over and above salary, for customers she brought over. Mayne settled into her new position as manager of O’Bannon’s print shop and developed close relationships with the company’s customers. Because O’Bannon only employed one or two other employees at any given time (often teenagers), Mayne worked closely and directly with O’Bannon’s customers over the course of her five years of employment, particularly its repeat business clients. Mayne was the go-to person for O’Bannon’s business customers and offered direct, personal assistance to them. Indeed, the evidence established that Mayne became the face of the business and “customers loved [her].”
Mayne ultimately resigned her employment with O’Bannon and purchased a competing print shop business within one-half mile of O’Bannon’s shop. O’Bannon filed suit and was granted a preliminary injunction on the basis of the non-compete agreement in Mayne’s employment agreement. On appeal, Mayne argued that O’Bannon failed to establish a reasonable likelihood of success at trial in order to support preliminary injunctive relief. Specifically, Mayne argued that the five-year restriction in her non-compete agreement unreasonable as a matter of law. The Court of Appeals disagreed.
The Court conceded that a five-year restriction is longer than most such restrictions deemed reasonable under Indiana law, stating, “To be sure, five years is a lengthy period for these types of restrictions.” And, in fact, the Court had to reach back to Indiana appellate cases decided in 1989 and 1964 to find other examples of a five-year restriction upheld as reasonable. Nonetheless, the Court relied on the close relationships developed by Mayne during her employment with O’Bannon to uphold the restriction. Additionally, the Court noted that the geographic scope of the non-compete agreement was limited to two Southern Indiana counties and cited the fact that Mayne previously operated a print shop in Louisville, Kentucky.
This case – albeit an unpublished decision – may give encouragement to drafters of non-compete agreements to reach further with regard to time restrictions. However, it must be noted that the Court based its decision on the unusually close relationship Mayne developed with O’Bannon’s customers and also cited to the very limited geographic scope of the non-compete agreement. Indiana courts will continue to review non-compete agreements for reasonableness as to the time, activity, and geographic area restrictions.