In a case applying Ohio law, the Indiana Supreme Court recently held that, for purposes of a non-competition agreement, competition with a subsidiary corporation also constituted competition with the parent. Baker v. Tremco Incorporated, No. 29S02-0902-CV-00065 (Ind. 2009).
In Tremco, the parent corporation was a manufacturer of roofing-related products. It had a subsidiary which provided services related to roofing projects. The parent had one of its salespersons, who sold products for the parent and services for the subsidiary, sign a post-employment non-competition agreement which barred the employee from competing “in any aspect” of the parent’s business for 18 months.
The salesperson eventually left and started a new business which he conceded directly competed with the subsidiary. However, he argued that because he was not competing with the parent, he was not in violation of his non-competition agreement with the parent.
This argument was rejected by the Indiana Supreme Court, which noted that while the salesperson was employed by the parent, he sold for both the parent and the subsidiary and all compensation was paid by the parent, regardless of whether commissions were earned for selling the parent’s products or the subsidiary’s services. Thus, the Court held that competition with the subsidiary was competition with the parent.
Non-compete cases are always fact and language-specific; in this case, both weighed in favor of enforceability.