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When non-competes don't fly

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Joe Guinn quit his job as an aviation mechanic to work for an employer offering shift work so he and his wife could split childcare duties for their young son. That’s when trouble started.

His former employer, Applied Composites Engineering Inc., sued him and notified his new employer that Guinn had signed a non-compete covenant that ACE required all its workers to sign. Guinn’s new employer terminated his employment after being notified of the clause.

joeguinn-1-15col.jpg Aviation mechanic Joe Guinn lost a job when his former employer sought to enforce a non-compete clause, but he won an appellate ruling that the company may have engaged in tortious interference with his subsequent employer. (IL Photo/Eric Learned)

“I didn’t know that, being in America, an employer had that kind of authority over one individual,” Guinn said. “I couldn’t believe an employer could actually hold me back from earning a living.”

Turns out that in Guinn’s case and others recently decided on appeal, they couldn’t.

ACE sued Guinn when he went to work for a company where he performed similar work, and it prevailed at the trial court level. A Marion Superior judge granted summary judgment in favor of ACE. But in September 2013, the Court of Appeals reversed and remanded the case. ACE failed to convince the Indiana Supreme Court to hear an appeal, with justices last month denying transfer to Joseph M. Guinn v. Applied Composites Engineering, Inc., 49A02-1303-CC-239.

Now, Guinn’s attorney, Donald Foley of Foley & Abbott in Indianapolis, is asking for punitive damages in addition to the compensatory damages Guinn sought in a cross-complaint against ACE.

“They were trying to chill him,” Foley said. “The question is whether (getting Guinn terminated) was intentional, and in our view, it was.”

Fishers attorney Peter Kovacs represents ACE and noted that just one of Guinn’s claims survived at the Court of Appeals, which tossed four others he argued. Kovacs said the case is headed to mediation ahead of a trial date tentatively set for Oct. 21.

“There’s just one count left in this dispute, and that’s tortious interference” with Guinn’s subsequent employer, Kovacs said. “It really has nothing to do with the non-compete.”

But it’s clear from recent rulings that Indiana caselaw continues to be built on Donahue v. Permacel Tape Corp., 127 N.E.2d 235 (1955). The Guinn panel cited its holding, that an employer “has no right to unnecessarily interfere with the employee’s following any trade or calling for which he is fitted and from which he may earn his livelihood and … cannot preclude him from exercising the skill and general knowledge he has acquired or increased through experience or even instructions while in the employment.”

Guinn’s case is one of three appeals decided recently involving non-compete clauses, all of which resulted in published opinions in favor of the employee. Each ruling contains the word “disfavor” to describe how such covenants are viewed under Indiana law.

foley-donald.jpg Foley

Kovacs has been on both sides of the issue, advising employers and employees on non-compete covenants. “Indiana strictly construes these agreements,” he said.

“They need to be as narrowly focused as is humanly possible. If you start going overboard in terms of geography, time, etc., you run the risk the court will find that overbroad.”

Foley also has advised employers on drafting covenants as well as employees such as Guinn. He agrees non-competes have their place and can be enforceable. “You’ve got to really identify what the protectable interest is.”

In Guinn, the Court of Appeals ruled that “the designated evidence could weigh in favor of the determination that ACE’s interference with Guinn’s new employment … was unjustified.”

Another recent reversal came from the Court of Appeals in October. Judges Elaine Brown, Edward Najam and Paul Mathias – the same panel that decided Guinn – ordered reversal in Daniel B. Buffkin v. Glacier Group, 79A02-1302-PL-141.

Daniel Buffkin was a contracted information technology recruiter for Glacier Group, which obtained an injunction in Tippecanoe Superior Court preventing him from doing similar work. The COA reversed, holding that the agreement Buffkin was made to sign “is unreasonable in terms of the activities it prohibits and its geographic restraints. Accordingly, the non-competition covenant in the Agreement was unenforceable.”

Lewis & Kappes P.C. attorney Sara R. Blevins in Indianapolis represented Buffkin on appeal and said the case has since settled confidentially.

She said employers have to consider the risks of a non-compete covenant as well as what they aim to protect. “It’s very fact-specific for each employer and each employee. There aren’t any magic words, but it needs to be narrowly tailored … to protect the legitimate interest of that particular employer.”

Blevins advises employers who use the agreements to stay on top of them and adjust them to keep up with their business concerns and the law. “It’s always a good idea to have those refreshed,” she said of non-competes. “Sometimes clauses are going to need to be tweaked from employee to employee.”

A third recently published appellate opinion regarding non-competes was decided Feb. 20. In Clark’s Sales and Service, Inc. v. John D. Smith and Ferguson Enterprises, Inc., 49A02-1306-PL-552, a panel affirmed a Marion Superior Court ruling denying an injunction Clark’s Sales and Service Inc. sought against a former employee and his new employer. The panel ruled the covenant was overbroad and unreasonable.

blevins-sara.jpg Blevins

“The problem in many of these situations is the employer has an overly broad contract,” Foley said. “In Mr. Guinn’s case, they restricted him from any type of employment with an airline maintenance company, and that includes jobs he never came close to performing – sales, finance, management.

“He couldn’t even have been a janitor in competition with ACE” without violating the covenant, Foley said.

Also troubling, he added, was that everyone who worked in any capacity had to sign an identical covenant. Guinn was asked to sign a non-compete covenant after he’d already worked for ACE for a period of time, according to the appellate case record.

Guinn since has found employment as an aviation mechanic for a company that he requested not be disclosed. He said that when he lost a job after the non-compete clause was presented to his new employer, he grew concerned about whether he’d be able to ply a trade for which he put himself through school to become FAA-certified.

“To have somebody try to strip you of that is pretty scary,” Guinn said. “I disliked what they did, and I hope this keeps them from pursuing anyone else the way they did me. I put my faith in the law on this one.”•

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  1. So that none are misinformed by my posting wihtout a non de plume here, please allow me to state that I am NOT an Indiana licensed attorney, although I am an Indiana resident approved to practice law and represent clients in Indiana's fed court of Nth Dist and before the 7th circuit. I remain licensed in KS, since 1996, no discipline. This must be clarified since the IN court records will reveal that I did sit for and pass the Indiana bar last February. Yet be not confused by the fact that I was so allowed to be tested .... I am not, to be clear in the service of my duty to be absolutely candid about this, I AM NOT a member of the Indiana bar, and might never be so licensed given my unrepented from errors of thought documented in this opinion, at fn2, which likely supports Mr Smith's initial post in this thread: http://caselaw.findlaw.com/us-7th-circuit/1592921.html

  2. When I served the State of Kansas as Deputy AG over Consumer Protection & Antitrust for four years, supervising 20 special agents and assistant attorneys general (back before the IBLE denied me the right to practice law in Indiana for not having the right stuff and pretty much crushed my legal career) we had a saying around the office: Resist the lure of the ring!!! It was a take off on Tolkiem, the idea that absolute power (I signed investigative subpoenas as a judge would in many other contexts, no need to show probable cause)could corrupt absolutely. We feared that we would overreach constitutional limits if not reminded, over and over, to be mindful to not do so. Our approach in so challenging one another was Madisonian, as the following quotes from the Father of our Constitution reveal: The essence of Government is power; and power, lodged as it must be in human hands, will ever be liable to abuse. We are right to take alarm at the first experiment upon our liberties. I believe there are more instances of the abridgement of freedom of the people by gradual and silent encroachments by those in power than by violent and sudden usurpations. Liberty may be endangered by the abuse of liberty, but also by the abuse of power. All men having power ought to be mistrusted. -- James Madison, Federalist Papers and other sources: http://www.constitution.org/jm/jm_quotes.htm RESIST THE LURE OF THE RING ALL YE WITH POLITICAL OR JUDICIAL POWER!

  3. My dear Mr Smith, I respect your opinions and much enjoy your posts here. We do differ on our view of the benefits and viability of the American Experiment in Ordered Liberty. While I do agree that it could be better, and that your points in criticism are well taken, Utopia does indeed mean nowhere. I think Madison, Jefferson, Adams and company got it about as good as it gets in a fallen post-Enlightenment social order. That said, a constitution only protects the citizens if it is followed. We currently have a bevy of public officials and judicial agents who believe that their subjectivism, their personal ideology, their elitist fears and concerns and cause celebs trump the constitutions of our forefathers. This is most troubling. More to follow in the next post on that subject.

  4. Yep I am not Bryan Brown. Bryan you appear to be a bigger believer in the Constitution than I am. Were I still a big believer then I might be using my real name like you. Personally, I am no longer a fan of secularism. I favor the confessional state. In religious mattes, it seems to me that social diversity is chaos and conflict, while uniformity is order and peace.... secularism has been imposed by America on other nations now by force and that has not exactly worked out very well.... I think the American historical experiment with disestablishmentarianism is withering on the vine before our eyes..... Since I do not know if that is OK for an officially licensed lawyer to say, I keep the nom de plume.

  5. I am compelled to announce that I am not posting under any Smith monikers here. That said, the post below does have a certain ring to it that sounds familiar to me: http://www.catholicnewworld.com/cnwonline/2014/0907/cardinal.aspx

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