open-agreements 0.7.6 → 0.7.7

package/skills/non-compete-contract-explainer/content/indiana.md

@@ -0,0 +1,253 @@
+---
+jurisdiction: "Indiana"
+slug: indiana
+countryCode: US
+snapshotAsOf: "2026-06-08"
+lastReviewed: "2026-06-03"
+canonicalUrl: https://openagreements.org/legal/non-compete/indiana
+license: CC BY 4.0
+stale: false
+---
+
+> [!IMPORTANT]
+> **Informational only — not legal advice.** This is a snapshot of an OpenAgreements practice note,
+> provided for general information. It is not legal advice, does not create an attorney-client
+> relationship, and is not a substitute for a licensed attorney in the relevant jurisdiction.
+> Laws change; verify against the canonical version before relying on it.
+>
+> **Canonical:** https://openagreements.org/legal/non-compete/indiana · **Snapshot as of:** 2026-06-08 · License: CC BY 4.0 · © UseJunior
+
+# Non-Competes in Indiana[^about]
+
+Indiana enforces non-competes only when they are reasonable and protect a legitimate interest, applies a strict eraser-style blue pencil, and bans most physician-hospital covenants by statute.
+
+
+## At a glance
+
+| Question | Indiana |
+| --- | --- |
+| **Are non-competes enforceable?** | Allowed if reasonable |
+| **Bottom line** | Indiana enforces a non-compete only if the employer proves it is reasonable in time, activity, and geography and protects a legitimate interest; courts disfavor them and use a strict eraser blue pencil. |
+| **Main law or case** | common law (Central Indiana Podiatry, P.C. v. Krueger, 882 N.E.2d 723 (Ind. 2008)) |
+| **Main exceptions** | Physician-hospital covenants banned (SEA 475, 2025); primary-care physician non-competes banned (SEA 7, 2023); physician covenants must meet HEA 1004 |
+| **Can a court narrow it?** | Only strikes wording |
+| **Applies to contractors?** | Unclear |
+| **Restriction extended during a breach?** | Unsettled |
+| **Maximum length set by law** | No statutory limit |
+
+## Are employee non-compete agreements enforceable in Indiana? {#employee-noncompetes}
+
+**Short answer.** Yes, sometimes. Indiana is a reasonableness state, not a general ban state for the ordinary workforce. Courts disfavor non-competes as restraints of trade, construe them strictly against the employer, and enforce them only when the restraint is reasonable and protects a legitimate business interest [^krueger-strict-construction][^dicen-disfavored].
+
+There is no general Indiana statute governing non-competes for most employees; the enforceability analysis is judge-made. The Indiana Supreme Court has long treated these covenants as disfavored and read them narrowly, placing the burden on the employer to justify every restriction [^krueger-strict-construction]. The one large statutory exception — a layered set of restrictions on physician covenants — is covered later in this note.
+
+> [!NOTE]
+> **Practice note.**
+>
+> Do not assume an Indiana covenant is enforceable just because the employee signed it. The employer carries the burden, courts construe the restraint strictly against the drafter, and an unreasonable restriction will not be enforced [^krueger-strict-construction].
+
+## What legitimate business interests can support an Indiana non-compete? {#protectable-interests}
+
+**Short answer.** Customer goodwill, established customer relationships, trade secrets, and confidential information are the recognized interests that can justify a tailored Indiana restraint. The employer must first prove it has such an interest before any restriction will be tested for reasonableness [^krueger-legitimate-interest].
+
+A covenant cannot exist only to insulate the employer from ordinary competition. An employee's general skills and routine industry knowledge are not protectable, so a restraint that simply keeps a former worker out of the market is void as against public policy. The protectable interest must be something the employer is entitled to guard — typically goodwill, customer relationships, or confidential information [^krueger-legitimate-interest].
+
+Indiana's Uniform Trade Secrets Act supplies a statutory overlay that runs alongside any covenant. It defines a trade secret by the twin tests of independent economic value from secrecy and reasonable efforts to keep it secret, and it displaces conflicting common law except contract law — so trade-secret remedies coexist with a contractual restraint or NDA rather than replacing it [^iutsa-trade-secret]. A confidentiality and trade-secret strategy is often the more durable protection, especially where a non-compete is unenforceable or, for hospital-employed physicians, statutorily void.
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> Do not draft an Indiana non-compete around a general wish to avoid competition. Identify the specific goodwill, customer relationship, or confidential information at stake, because the employer must prove a legitimate protectable interest before a court will even reach the reasonableness of time, activity, or geography [^krueger-legitimate-interest].
+
+## Is continued at-will employment enough consideration for an Indiana non-compete? {#consideration}
+
+**Short answer.** Yes. In Indiana, an employer's promise to continue an at-will employee's job is valid consideration for a non-compete signed during employment — even when the employee is told to sign the new covenant or be fired [^med1-consideration].
+
+The Indiana Court of Appeals settled this point in *Med-1 Solutions, LLC v. Taylor* (2024), confirming a longstanding rule: continued employment of an at-will worker supplies the consideration needed for a mid-employment restrictive covenant. No separate bonus, raise, or promotion is required [^med1-consideration]. This is a meaningful contrast with neighboring states that require new, independent consideration when an incumbent signs.
+
+Even so, consideration is only the threshold. In *Med-1 Solutions* itself the court still affirmed the denial of an injunction because the employer could not show the restraint was reasonable — so a covenant supported by continued employment can still fail on overbreadth.
+
+## What duration, geography, and activity scope are reasonable for an Indiana non-compete? {#duration-geography-scope}
+
+**Short answer.** There is no fixed cap. The employer bears the burden of proving the covenant is reasonable in time, activity, and geographic scope, and a restraint that bars working for a competitor in *any capacity* is routinely struck down as too broad [^krueger-scope-burden][^med1-any-capacity].
+
+Indiana courts evaluate the three dimensions together against the employer's real footprint and the employee's actual role. Duration should match the time needed to protect the interest; geography should track where the employer does business or where the employee held influence; and the restricted activity must relate to the work the employee actually performed [^krueger-scope-burden].
+
+The activity dimension is where covenants most often fail. In *Med-1 Solutions*, a clause that would have barred the employee from working for a competitor in *any capacity* — including roles unrelated to any protectable interest — was held unreasonably broad [^med1-any-capacity].
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> Do not bar a former employee from a competitor in *any capacity* or across business lines they never touched. Tie the restricted activity to the employee's actual role and the protected interest, because an Indiana court placed the burden on the employer and found exactly that kind of all-capacity restraint unreasonably broad [^med1-any-capacity].
+
+## Will an Indiana court blue-pencil or reform an overbroad non-compete? {#court-narrowing}
+
+**Short answer.** Only by deleting, never by rewriting. Indiana's blue-pencil doctrine is a strict eraser: a court may strike grammatically divisible unreasonable language, but it cannot add, change, or rearrange terms to save a covenant — even if the contract contains a clause inviting the court to do so [^heraeus-eraser][^heraeus-reformation-clause].
+
+The Indiana Supreme Court reaffirmed this in *Heraeus Medical, LLC v. Zimmer, Inc.* (2019). A court may excise offending words from a divisible covenant, but it may not rewrite the agreement, and a contractual reformation or modification clause does not expand that power [^heraeus-reformation-clause]. The blue pencil is available only where the covenant is *clearly divisible* and a reasonable restriction survives after the unreasonable parts are removed [^heraeus-divisibility].
+
+That divisibility requirement is decisive. In *Clark's Sales and Service, Inc. v. Smith*, an overbroad restriction that was written as an interconnected whole could not be saved, because there was no severable language a court could strike to leave a reasonable covenant behind [^clarks-indivisible].
+
+"The doctrine, however, does not allow a court to rewrite a noncompetition agreement by adding, changing, or rearranging terms."[^heraeus-eraser]
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> Do not rely on a reformation or savings clause to rescue an aggressive Indiana covenant — it is a dead letter. Draft narrow, severable restrictions from the start, because an Indiana court will only erase divisible offending language and will void an indivisible overbroad covenant entirely [^heraeus-reformation-clause][^clarks-indivisible].
+
+## Are customer non-solicitation and employee no-hire clauses enforceable in Indiana? {#non-solicitation}
+
+**Short answer.** They are analyzed under the same reasonableness and eraser rules as non-competes. A no-hire clause barring solicitation of *all* of the former employer's workers is overbroad and unenforceable; it must be narrowed to employees in whom the company has a genuine protectable interest [^heraeus-nosolicit-overbroad].
+
+In *Heraeus*, an employee non-solicitation covenant failed because it reached every company employee, not just those tied to a protectable interest [^heraeus-nosolicit-overbroad]. The same reasonableness analysis governs customer non-solicitation. Because any restraint must be tied to a legitimate protectable interest, a customer restriction is on firmer ground when limited to customers the employee actually served or about whom the employee held confidential information, and weaker when it sweeps in all customers regardless of contact [^q6-krueger-interest].
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> Do not draft a no-hire clause that covers *any* or *all* employees of the company. Limit it to workers who hold confidential information or specialized value, because Indiana voided a blanket employee non-solicitation covenant as overbroad and the eraser rule will not rewrite it for you [^heraeus-nosolicit-overbroad].
+
+## Are liquidated-damages clauses in Indiana non-competes enforceable? {#liquidated-damages}
+
+**Short answer.** Only if they are a reasonable measure of anticipated loss. Indiana courts will treat a liquidated-damages provision as an unenforceable penalty when the stipulated sum is grossly disproportionate to the loss from the breach or sweeps in too much conduct [^amconsulting-penalty].
+
+In *American Consulting, Inc. v. Hannum Wagle & Cline Engineering, Inc.* (2019), the Indiana Supreme Court struck the liquidated-damages provisions at issue as penalties, finding them too broad to function as a reasonable estimate of damages [^amconsulting-penalty][^amconsulting-holding]. Because injunctive relief can be hard to obtain when a covenant's reasonableness is contested, employers often lean on liquidated damages — but an aggressive number that bears no relation to actual loss is itself a litigation risk.
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> Do not set a flat, oversized liquidated-damages figure as a non-compete enforcement substitute. Tie any stipulated sum to a reasonable estimate of anticipated loss, because Indiana struck liquidated-damages provisions that were grossly disproportionate and captured too much conduct as unenforceable penalties [^amconsulting-penalty].
+
+## Can an employer use a choice-of-law clause or fee-shifting to strengthen an Indiana covenant? {#choice-of-law-and-fees}
+
+**Short answer.** Only within limits. Indiana generally honors a forum or choice-of-law clause, but a contract for the improvement of Indiana real estate may not be made subject to another state's law or require out-of-state dispute resolution, and attorney's fees are available mainly for bad-faith or groundless litigation [^forum-void-construction][^fees-bad-faith].
+
+Employers sometimes try to escape Indiana's strict eraser rule by routing disputes to a more covenant-friendly state through a choice-of-law or forum clause. That tactic has a statutory limit in the construction context: for a contract to improve Indiana real estate, a provision making the contract subject to another state's law — or requiring litigation, arbitration, or other dispute resolution to occur in another state — is void [^forum-void-construction].
+
+On costs, Indiana follows the American Rule. A court may shift attorney's fees to the prevailing party only when the opponent's claim or defense was frivolous, unreasonable, or groundless, or was litigated in bad faith [^fees-bad-faith]. In practice, parties contract around the default with a prevailing-party fee clause, which Indiana courts routinely enforce.
+
+> [!NOTE]
+> **Practice note.**
+>
+> Do not assume a foreign choice-of-law or forum clause will carry an Indiana covenant dispute. For a contract to improve Indiana real estate the clause is void by statute, and absent a contractual fee provision, attorney's fees are recoverable only for frivolous or bad-faith litigation [^forum-void-construction][^fees-bad-faith].
+
+## Does an Indiana non-compete toll or extend during breach or litigation? {#tolling-extension}
+
+**Short answer.** This is an open Indiana question. No Indiana statute or precedential appellate decision squarely endorses automatically tolling or extending the restricted period while the former employee is in breach or while litigation is pending [^q8-krueger-reasonableness][^q8-heraeus-eraser].
+
+Two features of Indiana law cut against assuming an extension will be enforced. First, any clause that lengthens the restricted period is still part of the covenant and must satisfy the same reasonableness test, with the burden on the employer; an automatic, open-ended extension risks being found unreasonable [^q8-krueger-reasonableness]. Second, because Indiana courts may only erase divisible language and cannot rewrite a covenant, a court is unlikely to manufacture extra time that the contract did not clearly and reasonably provide [^q8-heraeus-eraser].
+
+A contractual extension-on-breach clause is therefore unsettled and fact-dependent in Indiana. It is most defensible when drafted as a separate, reasonable provision tied to the duration of an actual breach, rather than as an automatic or indefinite tolling of the clock.
+
+> [!NOTE]
+> **Practice note.**
+>
+> Open question: Indiana law is unsettled on whether a tolling or extension-on-breach clause is enforceable after the original period expires. Draft any such clause narrowly and tie it to the actual breach, and do not assume an Indiana court will add time to an expired covenant, because the courts can only erase — not rewrite — covenant language [^q8-heraeus-eraser].
+
+## Are non-competes tied to the sale of a business treated differently in Indiana? {#sale-of-business}
+
+**Short answer.** Yes. A covenant ancillary to the sale of a business — or to an owner's sale of an equity interest — is judged under a more liberal standard than an ordinary employment covenant, because the buyer is paying for goodwill that the seller could otherwise destroy [^dicen-sale-liberal][^zollinger-sale-standard].
+
+Indiana applies the skeptical, employer-disfavoring standard to employment covenants but a more lenient one to sale-ancillary restraints [^zollinger-sale-standard]. The Indiana Supreme Court explained in *Dicen* that sale-of-business promises are enforced on a more liberal basis than employment covenants [^dicen-sale-liberal], and the Court of Appeals applied that lenient standard in *Zollinger v. Wagner-Meinert Engineering, LLC* to an owner who sold his interest. The reason is goodwill: the Seventh Circuit, applying Indiana law in *E.T. Products, LLC v. D.E. Miller Holdings, Inc.*, upheld a broad sale covenant precisely to protect the goodwill the buyer purchased [^etproducts-goodwill].
+
+> [!NOTE]
+> **Practice note.**
+>
+> Do not analyze a sale-of-business or equity-sale covenant under the strict employment standard, in either direction. The seller faces a more liberal, buyer-favoring standard that tolerates broader restraints, so a covenant that would fail as an employment clause may well be enforced when it is ancillary to a sale [^zollinger-sale-standard][^etproducts-goodwill].
+
+## What special non-compete rules apply to Indiana physicians? {#physicians}
+
+**Short answer.** Indiana regulates physician non-competes by statute in three layers, each keyed to when the agreement was entered. For agreements entered on or after July 1, 2020, an enforceable physician covenant must include specified provisions, including a buyout option at a reasonable price; primary care physician non-competes entered on or after July 1, 2023 are banned outright; and physician-hospital non-competes entered on or after July 1, 2025 are void [^hea1004-requirements][^sea7-primary-care-ban][^sea475-hospital-ban].
+
+The 2020 baseline (House Enrolled Act 1004) created Indiana Code chapter 25-22.5-5.5, which applies to physician noncompetes entered on or after July 1, 2020 and makes every such covenant conditional on mandatory contract terms [^hea1004-requirements]. Among those terms, the physician must be given the option to purchase a complete and final release from the covenant at a reasonable price — a term the statute does not define, which has become a recurring point of dispute [^sea7-buyout].
+
+The 2023 amendments (Senate Enrolled Act 7) went further. They banned non-competes for primary care physicians entered on or after July 1, 2023 [^sea7-primary-care-ban], and made other physician covenants within the chapter unenforceable when, for example, the employer terminates the physician without cause [^sea7-without-cause].
+
+The 2025 amendment (Senate Enrolled Act 475) is the most sweeping. Effective July 1, 2025, a physician and a hospital, a parent company of a hospital, an affiliated manager of a hospital, or a hospital system may not enter a non-compete, and any agreement that violates the ban is void and unenforceable [^sea475-hospital-ban]. The ban reaches new agreements only — it does not invalidate covenants originally entered before July 1, 2025 — and it preserves trade-secret NDAs, a narrow non-solicitation of current employees lasting no more than one year (which may not restrict patient interactions, patient referrals, clinical collaboration, or the physician's professional relationships), and covenants tied to a physician's sale of a practice they majority-owned.
+
+"Any agreement in violation of this section is void and unenforceable."[^sea475-hospital-ban]
+
+> [!NOTE]
+> **Practice note.**
+>
+> Do not assume the 2025 ban covers every Indiana doctor. Senate Enrolled Act 475 reaches physicians employed by hospitals and hospital systems entering new covenants on or after July 1, 2025; private-practice groups remain subject instead to the 2020 requirements and the 2023 primary-care ban, so the rule depends on the execution date, the physician type, and the employer entity [^sea475-hospital-ban][^sea7-primary-care-ban].
+
+## Do low-wage or hourly Indiana workers have a special non-compete exemption? {#other-workers}
+
+**Short answer.** No. Indiana has not enacted any wage-threshold or hourly-worker exemption. Outside the physician statutes, every employee — regardless of income — is governed by the common-law reasonableness and protectable-interest analysis [^q11-dicen-common-law].
+
+A persistent online myth claims that Indiana Code 22-5-8-1 exempts low-wage workers from non-competes. That is false: section 22-5-8-1 is part of the chapter prohibiting the forced implantation of devices (microchips) in employees and has nothing to do with restrictive covenants. No enacted Indiana law protects low-wage workers from non-competes [^q11-dicen-common-law].
+
+Reform has been proposed but not enacted. In the 2026 session, Senate Bill 132 would have voided non-competes for employees earning less than $150,000 a year, and House Bill 1054 targeted certain plumbing-trade covenants — but both received only a first reading and did not advance out of committee before the session adjourned. They signal possible future direction, not current law; recheck the Indiana General Assembly each session.
+
+> [!NOTE]
+> **Practice note.**
+>
+> Do not tell an Indiana worker or employer that low-wage employees are statutorily exempt from non-competes. No such exemption exists; the often-cited Indiana Code 22-5-8-1 is the device-implantation statute, and the 2026 wage-threshold bill did not pass, so ordinary workers remain under the common-law reasonableness test [^q11-dicen-common-law].
+
+## Did the FTC's federal non-compete rule change Indiana non-compete law? {#federal-ftc-overlay}
+
+**Short answer.** No. The FTC's 2024 nationwide Non-Compete Rule was set aside by a federal court before it took effect, so Indiana non-competes remain governed by Indiana common law and the physician statutes [^ryan-ftc-set-aside].
+
+In *Ryan LLC v. Federal Trade Commission*, a federal court set the rule aside with nationwide effect, holding it would not be enforced or take effect [^ryan-ftc-set-aside]. The FTC has since signaled a shift toward case-by-case enforcement against specific covenants rather than a blanket rule, but that does not change Indiana's governing standards. The outcome leaves Indiana's reasonableness analysis, eraser-style blue pencil, and physician restrictions in control, and does not make any particular Indiana covenant enforceable.
+
+"The Non-Compete Rule, 16 C.F.R. § 910.1–.6, is hereby SET ASIDE and shall not be enforced or otherwise take effect on September 4, 2024, or thereafter."[^ryan-ftc-set-aside]
+
+[^about]: By Steven Obiajulu, J.D. Published by [openagreements.org](https://openagreements.org) · Maintained by [UseJunior](https://usejunior.com). Last reviewed 2026-06-03. License: CC BY 4.0. Steven Obiajulu, J.D. is admitted in New York, not Indiana. This article synthesizes Indiana primary law and is not legal advice from a Indiana-admitted attorney. This article is for informational purposes only and does not create an attorney-client relationship.
+
+[^krueger-strict-construction]: **Central Indiana Podiatry, P.C. v. Krueger** — "We construe these covenants strictly against the employer and will not enforce an unreasonable restriction." *Central Indiana Podiatry, P.C. v. Krueger, 882 N.E.2d 723 (Ind. 2008).* <https://www.courtlistener.com/opinion/852486/central-indiana-podiatry-pc-v-krueger/#:~:text=We%20construe%20these%20covenants%20strictly,not%20enforce%20an%20unreasonable%20restriction.>
+
+[^dicen-disfavored]: **Dicen v. New Sesco, Inc.** — "Covenants not to compete are not favored in the law." *Dicen v. New Sesco, Inc., 839 N.E.2d 684 (Ind. 2005).* <https://www.courtlistener.com/opinion/852724/dicen-v-new-sesco-inc/#:~:text=Covenants%20not%20to%20compete%20are,not%20favored%20in%20the%20law.>
+
+[^krueger-legitimate-interest]: **Central Indiana Podiatry, P.C. v. Krueger** — "In arguing the reasonableness of a non-competition agreement, the employer must first show that it has a legitimate interest to be protected by the agreement." *Central Indiana Podiatry, P.C. v. Krueger, 882 N.E.2d 723 (Ind. 2008).* <https://www.courtlistener.com/opinion/852486/central-indiana-podiatry-pc-v-krueger/#:~:text=In%20arguing%20the%20reasonableness%20of,be%20protected%20by%20the%20agreement.>
+
+[^iutsa-trade-secret]: **Indiana Uniform Trade Secrets Act, Ind. Code § 24-2-3** — "‘Trade secret’ means information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (1) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy." *Ind. Code § 24-2-3-2.* <https://iga.in.gov/laws/2025/ic/titles/24>
+
+[^med1-consideration]: **Med-1 Solutions, LLC v. Taylor** — "We hold that, where an at-will employee signs a non-competition agreement as a condition of their hiring and is later told to sign a new non-competition agreement or they will be fired, the employee's continued employment can serve as consideration for the latter agreement." *Med-1 Solutions, LLC v. Taylor, No. 24A-PL-450 (Ind. Ct. App. Nov. 25, 2024).* <https://www.courtlistener.com/opinion/10283022/med-1-solutions-llc-v-jennifer-taylor/#:~:text=We%20hold%20that%2C%20where%20an,consideration%20for%20the%20latter%20agreement.>
+
+[^krueger-scope-burden]: **Central Indiana Podiatry, P.C. v. Krueger** — "The employer also bears the burden of establishing that the agreement is reasonable in scope as to the time, activity, and geographic area restricted." *Central Indiana Podiatry, P.C. v. Krueger, 882 N.E.2d 723 (Ind. 2008).* <https://www.courtlistener.com/opinion/852486/central-indiana-podiatry-pc-v-krueger/#:~:text=The%20employer%20also%20bears%20the,activity%2C%20and%20geographic%20area%20restricted.>
+
+[^med1-any-capacity]: **Med-1 Solutions, LLC v. Taylor** — "We find that the scope of activity restricted by the covenant is unreasonably broad." *Med-1 Solutions, LLC v. Taylor, No. 24A-PL-450 (Ind. Ct. App. Nov. 25, 2024).* <https://www.courtlistener.com/opinion/10283022/med-1-solutions-llc-v-jennifer-taylor/#:~:text=We%20find%20that%20the%20scope,the%20covenant%20is%20unreasonably%20broad.>
+
+[^heraeus-eraser]: **Heraeus Medical, LLC v. Zimmer, Inc.** — "The doctrine, however, does not allow a court to rewrite a noncompetition agreement by adding, changing, or rearranging terms." *Heraeus Medical, LLC v. Zimmer, Inc., 135 N.E.3d 150 (Ind. 2019).* <https://www.courtlistener.com/opinion/4683524/heraeus-medical-llc-v-zimmer-inc/#:~:text=The%20doctrine%2C%20however%2C%20does%20not,adding%2C%20changing%2C%20or%20rearranging%20terms.>
+
+[^heraeus-reformation-clause]: **Heraeus Medical, LLC v. Zimmer, Inc.** — "Consistent with the history and purpose of Indiana's blue pencil doctrine, courts cannot add terms to an unenforceable restrictive covenant in a noncompetition agreement—even when that agreement contains language purporting to give a court the power to do so." *Heraeus Medical, LLC v. Zimmer, Inc., 135 N.E.3d 150 (Ind. 2019).* <https://www.courtlistener.com/opinion/4683524/heraeus-medical-llc-v-zimmer-inc/#:~:text=Consistent%20with%20the%20history%20and,the%20power%20to%20do%20so.>
+
+[^heraeus-divisibility]: **Heraeus Medical, LLC v. Zimmer, Inc.** — "A court can blue-pencil unreasonable provisions from a restrictive covenant if the covenant is clearly divisible into parts and if a reasonable restriction remains to be enforced after the unreasonable portions have been eliminated." *Heraeus Medical, LLC v. Zimmer, Inc., 135 N.E.3d 150 (Ind. 2019).* <https://www.courtlistener.com/opinion/4683524/heraeus-medical-llc-v-zimmer-inc/#:~:text=A%20court%20can%20blue%2Dpencil%20unreasonable,unreasonable%20portions%20have%20been%20eliminated.>
+
+[^clarks-indivisible]: **Clark's Sales and Service, Inc. v. Smith** — "Paragraph 7(C) is indivisible and unreasonable as a whole, and the blue pencil doctrine is inapplicable." *Clark's Sales and Service, Inc. v. Smith, 4 N.E.3d 772 (Ind. Ct. App. 2014).* <https://www.courtlistener.com/opinion/2725543/clarks-sales-and-service-inc-v-john-d-smith-and-ferguson-enterprises/#:~:text=Paragraph%207(C)%20is%20indivisible%20and,blue%20pencil%20doctrine%20is%20inapplicable.>
+
+[^heraeus-nosolicit-overbroad]: **Heraeus Medical, LLC v. Zimmer, Inc.** — "As written, the Kolbe Agreement's employee nonsolicitation covenant is overbroad because it applies to all Zimmer employees." *Heraeus Medical, LLC v. Zimmer, Inc., 135 N.E.3d 150 (Ind. 2019).* <https://www.courtlistener.com/opinion/4683524/heraeus-medical-llc-v-zimmer-inc/#:~:text=As%20written%2C%20the%20Kolbe%20Agreement's,applies%20to%20all%20Zimmer%20employees.>
+
+[^q6-krueger-interest]: **Central Indiana Podiatry, P.C. v. Krueger** — "In arguing the reasonableness of a non-competition agreement, the employer must first show that it has a legitimate interest to be protected by the agreement." *Central Indiana Podiatry, P.C. v. Krueger, 882 N.E.2d 723 (Ind. 2008).* <https://www.courtlistener.com/opinion/852486/central-indiana-podiatry-pc-v-krueger/#:~:text=In%20arguing%20the%20reasonableness%20of,be%20protected%20by%20the%20agreement.>
+
+[^amconsulting-penalty]: **American Consulting, Inc. v. Hannum Wagle & Cline Engineering, Inc.** — "When liquidated damages are grossly disproportionate to the loss that results from the breach or are unconscionably in excess of the loss sought to be asserted, appellate courts will treat the sum as an unenforceable penalty rather than as liquidated damages." *American Consulting, Inc. v. Hannum Wagle & Cline Eng'g, Inc., 136 N.E.3d 208 (Ind. 2019).* <https://www.courtlistener.com/opinion/4688172/american-consulting-inc-dba-american-structurepoint-inc-v-hannum/#:~:text=When%20liquidated%20damages%20are%20grossly,rather%20than%20as%20liquidated%20damages.>
+
+[^amconsulting-holding]: **American Consulting, Inc. v. Hannum Wagle & Cline Engineering, Inc.** — "In sum, we find that all of the liquidated damages provisions at issue are unenforceable penalties." *American Consulting, Inc. v. Hannum Wagle & Cline Eng'g, Inc., 136 N.E.3d 208 (Ind. 2019).* <https://www.courtlistener.com/opinion/4688172/american-consulting-inc-dba-american-structurepoint-inc-v-hannum/#:~:text=In%20sum%2C%20we%20find%20that,at%20issue%20are%20unenforceable%20penalties.>
+
+[^forum-void-construction]: **Ind. Code § 32-28-3-17** — "A provision in a contract for the improvement of real estate in Indiana is void if the provision: (1) makes the contract subject to the laws of another state; or (2) requires litigation, arbitration, or other dispute resolution process on the contract occur in another state." *Ind. Code § 32-28-3-17.* <https://iga.in.gov/laws/2025/ic/titles/32>
+
+[^fees-bad-faith]: **Ind. Code § 34-52-1-1** — "In any civil action, the court may award attorney's fees as part of the cost to the prevailing party, if the court finds that either party: (1) brought the action or defense on a claim or defense that is frivolous, unreasonable, or groundless; (2) continued to litigate the action or defense after the party's claim or defense clearly became frivolous, unreasonable, or groundless; or (3) litigated the action in bad faith." *Ind. Code § 34-52-1-1(b).* <https://iga.in.gov/laws/2025/ic/titles/34>
+
+[^q8-krueger-reasonableness]: **Central Indiana Podiatry, P.C. v. Krueger** — "The employer also bears the burden of establishing that the agreement is reasonable in scope as to the time, activity, and geographic area restricted." *Central Indiana Podiatry, P.C. v. Krueger, 882 N.E.2d 723 (Ind. 2008).* <https://www.courtlistener.com/opinion/852486/central-indiana-podiatry-pc-v-krueger/#:~:text=The%20employer%20also%20bears%20the,activity%2C%20and%20geographic%20area%20restricted.>
+
+[^q8-heraeus-eraser]: **Heraeus Medical, LLC v. Zimmer, Inc.** — "The doctrine, however, does not allow a court to rewrite a noncompetition agreement by adding, changing, or rearranging terms." *Heraeus Medical, LLC v. Zimmer, Inc., 135 N.E.3d 150 (Ind. 2019).* <https://www.courtlistener.com/opinion/4683524/heraeus-medical-llc-v-zimmer-inc/#:~:text=The%20doctrine%2C%20however%2C%20does%20not,adding%2C%20changing%2C%20or%20rearranging%20terms.>
+
+[^dicen-sale-liberal]: **Dicen v. New Sesco, Inc.** — "We hold that such promises not to compete should be enforced on a more liberal basis than the skeptical one courts use regarding contracts between employer and employee." *Dicen v. New Sesco, Inc., 839 N.E.2d 684 (Ind. 2005).* <https://www.courtlistener.com/opinion/852724/dicen-v-new-sesco-inc/#:~:text=We%20hold%20that%20such%20promises,contracts%20between%20employer%20and%20employee.>
+
+[^zollinger-sale-standard]: **Zollinger v. Wagner-Meinert Engineering, LLC** — "Covenants in typical employment contracts are reviewed under a ‘skeptical’ standard, while covenants that arise ancillary to the sale of a business are subject to a more liberal standard." *Zollinger v. Wagner-Meinert Eng'g, LLC, 146 N.E.3d 1060 (Ind. Ct. App. 2020).* <https://www.courtlistener.com/opinion/4747784/wayne-doug-zollinger-v-wagner-meinert-engineering-llc/#:~:text=Covenants%20in%20typical%20employment%20contracts,to%20a%20more%20liberal%20standard.>
+
+[^etproducts-goodwill]: **E.T. Products, LLC v. D.E. Miller Holdings, Inc.** — "Indiana courts recognize that in a business sale, ‘a broad noncompetition agreement may be necessary to assure that the buyer receives that which he purchased.’" *E.T. Products, LLC v. D.E. Miller Holdings, Inc., 872 F.3d 464 (7th Cir. 2017).* <https://www.courtlistener.com/opinion/4427509/et-products-llc-v-de-miller-holdings-inc/#:~:text=Indiana%20courts%20recognize%20that%20in,receives%20that%20which%20he%20purchased.%22>
+
+[^hea1004-requirements]: **House Enrolled Act 1004 (2020), Ind. Code § 25-22.5-5.5-2** — "To be enforceable, a physician noncompete agreement must include all of the following provisions:" *Ind. Code § 25-22.5-5.5-2 (House Enrolled Act 1004, P.L. 93-2020).* <https://iga.in.gov/pdf-documents/121/2020/house/bills/HB1004/HB1004.05.ENRS.pdf>
+
+[^sea7-primary-care-ban]: **Senate Enrolled Act 7 (2023), Ind. Code § 25-22.5-5.5-2.5** — "Notwithstanding any other law, a primary care physician and an employer may not enter into a noncompete agreement." *Ind. Code § 25-22.5-5.5-2.5(b) (Senate Enrolled Act 7, P.L. 165-2023).* <https://iga.in.gov/pdf-documents/123/2023/senate/bills/SB0007/SB0007.05.ENRH.pdf>
+
+[^sea475-hospital-ban]: **Senate Enrolled Act 475 (2025), Ind. Code § 25-22.5-5.5-2.3** — "Any agreement in violation of this section is void and unenforceable." *Ind. Code § 25-22.5-5.5-2.3(c) (Senate Enrolled Act 475, P.L. 207-2025).* <https://iga.in.gov/pdf-documents/124/2025/senate/bills/SB0475/SB0475.04.ENRH.pdf>
+
+[^sea7-buyout]: **Senate Enrolled Act 7 (2023), Ind. Code § 25-22.5-5.5-2** — "(4) A provision that provides the physician whose employment has terminated or whose contract has expired with the option to purchase a complete and final release from the terms of the enforceable physician noncompete agreement at a reasonable price." *Ind. Code § 25-22.5-5.5-2(a)(4) (Senate Enrolled Act 7, P.L. 165-2023).* <https://iga.in.gov/pdf-documents/123/2023/senate/bills/SB0007/SB0007.05.ENRH.pdf>
+
+[^sea7-without-cause]: **Senate Enrolled Act 7 (2023), Ind. Code § 25-22.5-5.5-2** — "The employer terminates the physician's employment without cause." *Ind. Code § 25-22.5-5.5-2(b)(1) (Senate Enrolled Act 7, P.L. 165-2023).* <https://iga.in.gov/pdf-documents/123/2023/senate/bills/SB0007/SB0007.05.ENRH.pdf>
+
+[^q11-dicen-common-law]: **Dicen v. New Sesco, Inc.** — "Covenants not to compete are not favored in the law." *Dicen v. New Sesco, Inc., 839 N.E.2d 684 (Ind. 2005).* <https://www.courtlistener.com/opinion/852724/dicen-v-new-sesco-inc/#:~:text=Covenants%20not%20to%20compete%20are,not%20favored%20in%20the%20law.>
+
+[^ryan-ftc-set-aside]: **Ryan LLC v. Federal Trade Commission** — "The Non-Compete Rule, 16 C.F.R. § 910.1–.6, is hereby SET ASIDE and shall not be enforced or otherwise take effect on September 4, 2024, or thereafter." *Ryan LLC v. Fed. Trade Comm'n, 746 F. Supp. 3d 369 (N.D. Tex. 2024).* <https://www.courtlistener.com/opinion/10205745/ryan-llc-v-federal-trade-commission/#:~:text=The%20Non%2DCompete%20Rule%2C%2016%20C.F.R.,September%204%2C%202024%2C%20or%20thereafter.>

package/skills/non-compete-contract-explainer/content/iowa.md

@@ -0,0 +1,232 @@
+---
+jurisdiction: "Iowa"
+slug: iowa
+countryCode: US
+snapshotAsOf: "2026-06-08"
+lastReviewed: "2026-06-02"
+canonicalUrl: https://openagreements.org/legal/non-compete/iowa
+license: CC BY 4.0
+stale: false
+---
+
+> [!IMPORTANT]
+> **Informational only — not legal advice.** This is a snapshot of an OpenAgreements practice note,
+> provided for general information. It is not legal advice, does not create an attorney-client
+> relationship, and is not a substitute for a licensed attorney in the relevant jurisdiction.
+> Laws change; verify against the canonical version before relying on it.
+>
+> **Canonical:** https://openagreements.org/legal/non-compete/iowa · **Snapshot as of:** 2026-06-08 · License: CC BY 4.0 · © UseJunior
+
+# Non-Competes in Iowa[^about]
+
+Iowa non-compete law uses a three-prong common-law reasonableness test, permits judicial reformation through a 'purple pencil' approach, leaves tolling unresolved, carves out narrow industry bans for mental health, health-care staffing, franchise, and UIHC clinical roles, and preserves trade-secret alternatives under chapter 550.
+
+
+## At a glance
+
+| Question | Iowa |
+| --- | --- |
+| **Are non-competes enforceable?** | Allowed if reasonable |
+| **Bottom line** | Iowa enforces an employee non-compete only if it satisfies a three-prong reasonableness test, with the employer bearing the burden; courts may reform an overbroad covenant rather than void it. |
+| **Main law or case** | common law (Revere Transducers, Inc. v. Deere & Co., 595 N.W.2d 751 (Iowa 1999)) |
+| **Main exceptions** | Mental-health professionals (§ 147.161); health-care staffing workers (§ 135Q.2); franchise nonrenewal (§ 537A.10); UIHC clinical roles (HF 2254, 2026) |
+| **Can a court narrow it?** | Yes — rewrites to reasonable |
+| **Applies to contractors?** | Yes |
+| **Restriction extended during a breach?** | Unsettled |
+| **Maximum length set by law** | No statutory safe harbor (case by case) |
+
+## Are employee non-compete agreements enforceable in Iowa? {#employee-noncompetes}
+
+**Short answer.** Yes, when they are reasonable. Iowa has no general employee non-compete statute, so ordinary employment covenants are governed by a common-law reasonableness test that asks whether the restraint protects the employer without overburdening the employee or the public [^q1-revere-three-prong].
+
+Iowa courts do not treat employee non-competes as void per se. The starting point is the Iowa Supreme Court rule restated in *Revere Transducers*: an employment restrictive covenant can be enforced only if it satisfies the three Iowa reasonableness prongs:
+
+"(1) Is the restriction reasonably necessary for the protection of the employer’s business; (2) is it unreasonably restrictive of the employee’s rights; and (3) is it prejudicial to the public interest?"[^q1-revere-three-prong]
+
+That common-law baseline matters because Iowa has enacted several narrow profession or industry restrictions, but not a statewide ban for all employees.
+
+## What reasonableness test do Iowa courts apply to non-competes? {#reasonableness-test}
+
+**Short answer.** Iowa applies a three-prong test, and the employer bears the burden. The covenant must be reasonably necessary to protect the business, not unreasonably restrictive of the employee, and not prejudicial to the public interest [^q2-lamp-three-prong][^q2-iowa-glass-burden].
+
+The Iowa Supreme Court stated the test directly in *Lamp v. American Prosthetics*, an employee covenant case involving a prosthetics business.
+
+"Because this case was tried in equity, our review is de novo. Iowa R.App.P. 4. In deciding whether to enforce a restrictive covenant, the court will apply a three-pronged test: (1) Is the restriction reasonably necessary for the protection of the employer’s business; (2) is it unreasonably restrictive of the employee’s rights; and (3) is it prejudicial to the public interest?"[^q2-lamp-three-prong]
+
+The burden does not shift to the former employee. *Iowa Glass Depot* places reasonableness on the party seeking enforcement, and it also frames the analysis as a balance between fair protection for the employer and unnecessary interference with the employee [^q2-iowa-glass-burden].
+
+## What legitimate business interests can an Iowa non-compete protect? {#legitimate-business-interest}
+
+**Short answer.** Customer relationships, employer-specific information, and specialized training can matter, but ordinary competition is not enough. Iowa courts look at customer proximity, information peculiar to the employer, the nature of the business, and the restrained occupation [^q3-revere-factors].
+
+The protectable-interest inquiry is practical. A route salesperson, account manager, specialist, or consultant with close customer ties may present a stronger case than an employee whose work involves common skills, public information, or little customer influence.
+
+"Factors we consider in determining the enforceability of a noncompete agreement include the employee’s close proximity to customers, the nature of the business, accessibility to information peculiar to the employer’s business, and the nature of the occupation which is restrained."[^q3-revere-factors]
+
+The other side of that rule is equally important. Iowa does not let a covenant suppress the employee's general skill and experience. In *Iowa Glass Depot*, the covenant failed in part because the employee had little specialized training and no trade secrets or exclusive customer list to take [^q3-iowa-glass-general-skill].
+
+*AG Spectrum* shows the same limit in an independent-contractor setting. The Eighth Circuit, applying Iowa law, treated the company's ordinary reseller support and training as not entitled to special protection [^q3-ag-spectrum-support].
+
+## How long or geographically broad can an Iowa non-compete be? {#time-and-geography}
+
+**Short answer.** There is no statutory safe harbor. Iowa evaluates duration, geography, and activity limits case by case, and the Eighth Circuit, applying Iowa law, has predicted that Iowa treats the ultimate enforceability question as one for the court [^q4-ag-spectrum-court-question][^q4-pro-edge-one-year].
+
+The examples are fact-specific. In *Pro Edge*, a federal court applying Iowa law enforced a one-year, 250-mile restriction against a veterinarian whose customer relationships were central to the employer's Montana embryo-transfer business.
+
+"Further, the court finds that the covenant not to compete is not unreasonably restrictive in time or area. The non-compete clause does not prevent Dr. Gue from practicing in the field of veterinary medicine, nor even in the specialty of embryo transfer in livestock. It merely prevents him from doing so within 250-miles of a Trans Ova facility, and for only 1 year following his separation from employment."[^q4-pro-edge-one-year]
+
+By contrast, *AG Spectrum* held a three-year restraint unreasonable on a record where the independent contractor developed his own customer base and received minimal support from the company [^q4-ag-spectrum-unreasonable]. The same case predicted that Iowa would leave enforceability to the court rather than a jury [^q4-ag-spectrum-court-question].
+
+## Will an Iowa court fix an overbroad non-compete or void it? {#court-reformation}
+
+**Short answer.** Usually it may reform. Iowa rejected a strict all-or-nothing approach and allows partial enforcement to the extent reasonably necessary to protect legitimate interests, unless the facts show bad faith or oppression [^q5-ehlers-reform].
+
+This is Iowa's version of a *purple pencil* rule. In *Ehlers*, the Iowa Supreme Court overruled the prior all-or-nothing rule and adopted partial enforcement for employment covenants.
+
+"I. In view of the position we take here, it is unnecessary to discuss these propositions separately. We now overrule Brecher v. Brown (1945), 235 Iowa 627 , 17 N.W.2d 377 , and adopt the rule that unless the facts and circumstances indicate bad faith on the part of the employer, we will enforce noncompetitive covenants to the extent they are reasonably necessary to protect his legitimate interests without imposing undue hardship on the employee when the public interest is not adversely affected."[^q5-ehlers-reform]
+
+*Farm Bureau* then applied the rule, narrowing a petroleum delivery covenant to the activities and six-township territory the employee actually served [^q5-farm-bureau-partial].
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> Do not draft an intentionally oppressive covenant and assume a court will rescue it. *Ehlers* expressly preserves a bad-faith limit, and no covenant inserted for reasons other than protecting legitimate employer interests should be enforced in equity [^q5-ehlers-bad-faith].
+
+## Does an Iowa non-compete period toll or extend during breach or litigation? {#tolling-during-breach}
+
+**Short answer.** Iowa has no controlling appellate authority squarely deciding that a non-compete period tolls during breach or enforcement litigation. The closest Iowa doctrine is reformation, which reshapes an overbroad covenant to a reasonable scope; it is not a tolling rule [^q6-ehlers-reform].
+
+A drafted extension-on-breach clause would still have to survive Iowa's ordinary reasonableness test. That means the clause should be analyzed as part of the restraint's duration and practical burden, not assumed valid because Iowa courts can narrow overbroad covenants.
+
+*Farm Bureau* illustrates the difference. The court narrowed a covenant to activities, territory, and a fixed two-year period measured from employment termination; it did not announce any rule adding time back for breach or litigation delay [^q6-farm-bureau-fixed-period].
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> Treat tolling as an open Iowa issue. A clause that extends the restricted period during breach or litigation should be drafted as a defined, reasonable term and defended under the three-prong test, because Iowa reformation cases support narrowing unreasonable restraints, not automatically extending them [^q6-ehlers-reform][^q6-farm-bureau-fixed-period].
+
+## Are Iowa non-solicitation and no-business covenants treated like non-competes? {#non-solicitation-no-business}
+
+**Short answer.** Generally yes. Iowa analyzes non-solicitation, no-business, and similar post-employment restraints under the same reasonableness framework, scrutinizing whether the restricted activities and territory exceed what is necessary to protect the employer [^q7-farm-bureau-activities].
+
+Iowa cases often involve covenants that combine competition bans, customer-contact limits, and solicitation limits. The court's task is to identify what protection is reasonably necessary and what overreaches.
+
+"First it appears the activities restricted were more than were necessary for plaintiff’s protection. Defendant was restricted from any ‘ * * * business activity competitive to that of the company * * It would be ample protection for the plaintiff in this case to restrict a former employee only from those activities he undertook during his employment. Similarly defendant was restricted from activity throughout a two county area. It would have sufficed to restrict him from the six townships he worked in. The trial court rightly held the covenant too broad both as to scope and area."[^q7-farm-bureau-activities]
+
+So a customer non-solicit or no-business covenant may be easier to defend than a broad no-work covenant, but only when its scope tracks the employer's actual protectable relationships and does not suppress unrelated work.
+
+## Is continued employment enough consideration for an Iowa non-compete? {#consideration}
+
+**Short answer.** Generally yes. Iowa decisions treat continued employment for an indefinite period as sufficient consideration to support a covenant not to compete, even when the covenant is signed after employment begins [^q8-farm-bureau-consideration].
+
+This consideration rule does not make the covenant enforceable by itself. It only answers contract formation; the covenant still must satisfy the three-prong reasonableness test.
+
+"In Ehlers the contract was not executed until sometime after the employee went to work. The case might be distinguished by the concession in Ehlers that the matter was discussed when the job was undertaken. Ehlers is however authority for the proposition continuing employment for an indefinite period is sufficient consideration to support a covenant not to compete."[^q8-farm-bureau-consideration]
+
+*Iowa Glass Depot* says the same thing and then refuses enforcement on reasonableness grounds, showing why consideration and enforceability should be kept separate [^q8-iowa-glass-consideration].
+
+## Are there Iowa industry-specific non-compete bans? {#industry-specific-bans}
+
+**Short answer.** Yes, but they are narrow. Iowa has no general employee non-compete ban, but statutes restrict covenants for licensed mental health professionals, health-care employment agency workers, certain franchise nonrenewal situations, and 2026 UIHC clinical employment contracts [^q9-mental-health-ban][^q9-health-agency-ban][^q9-franchise-nonrenewal][^q9-hf2254-uihc].
+
+The mental-health statute prohibits employers from entering agreements that limit practice location, former-patient contact, or time of practice for licensed mental health professionals, and any provision contrary to the statute is void and unenforceable [^q9-mental-health-ban][^q9-mh-void]. Chapter 135Q bars health-care employment agencies from using noncompetes to restrict agency workers and from charging conversion fees when an agency worker is later hired directly [^q9-health-agency-ban].
+
+Iowa's franchise statute is not a general employee rule. In a market-withdrawal nonrenewal, the franchisor must agree not to enforce a non-compete against the nonrenewed franchisee [^q9-franchise-nonrenewal].
+
+H.F. 2254 is enacted 2026 law of limited reach. It directs the Board of Regents to adopt a policy barring the University of Iowa Hospitals and Clinics from including noncompetes in employment contracts with listed clinical roles; it is not a statewide physician non-compete ban.
+
+"Develop a policy that prohibits the university of Iowa hospitals and clinics from including a noncompete clause in an employment contract with an advanced registered nurse practitioner, a licensed practical nurse, a pharmacist, a physician, a physician assistant, or a registered nurse."[^q9-hf2254-uihc]
+
+> [!NOTE]
+> **Practice note.**
+>
+> Do not overstate the 2026 UIHC law. H.F. 2254 is limited to specified clinical employment contracts with the university of Iowa hospitals and clinics entered into, extended, or renewed on or after the Act's effective date; it does not ban non-competes for every Iowa physician or health-care employer [^q9-hf2254-effective].
+
+## How are sale-of-business non-competes treated in Iowa? {#sale-of-business}
+
+**Short answer.** More leniently than ordinary employee covenants. Iowa recognizes that a buyer of business goodwill may need broader protection than an employer restraining a wage earner, though the restraint still must be reasonable [^q10-baker-sale-goodwill].
+
+The Iowa Supreme Court drew that distinction in *Baker v. Starkey*. The reason is economic: in a sale of goodwill, the restriction helps preserve what the buyer purchased, and the seller and buyer are usually closer to parity than employer and employee.
+
+"In determining the question of reasonableness as to area and time, restrictive stipulations in agreements between employer and employee are not viewed with the same indulgence as such stipulations are between a vendor and vendee of a business and its good will."[^q10-baker-sale-goodwill]
+
+The distinction does not eliminate reasonableness review. *Baker* still refused to partially enforce the employee covenant before Iowa later adopted reformation in *Ehlers*, and its core point remains that employee restraints receive closer scrutiny than sale-of-business restraints.
+
+## What trade-secret and NDA tools exist alongside Iowa non-competes? {#trade-secrets-confidentiality}
+
+**Short answer.** Iowa chapter 550 remains available for trade secrets, and confidentiality covenants can operate alongside non-competes. Chapter 550 defines trade secrets, authorizes injunctions and damages, allows attorney fees in specified cases, and does not preempt all common-law tort theories involving trade secrets [^q11-trade-secret-definition][^q11-injunctive-relief][^q11-damages][^q11-fees][^q11-brandow-nonpreemption].
+
+The statutory definition focuses on economic value from secrecy and reasonable efforts to maintain secrecy.
+
+"‘Trade secret’ means information, including but not limited to a formula, pattern, compilation, program, device, method, technique, or process that is both of the following: a. Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by a person able to obtain economic value from its disclosure or use. b. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy."[^q11-trade-secret-definition]
+
+Chapter 550 also provides injunctive relief for actual or threatened misappropriation, damages for actual loss and unjust enrichment, and fee shifting for bad-faith claims, bad-faith injunction termination fights, or willful and malicious misappropriation [^q11-injunctive-relief][^q11-damages][^q11-fees].
+
+Unlike some states, Iowa has not made its trade-secret statute the exclusive route for all related tort claims. In *205 Corp. v. Brandow*, the Iowa Supreme Court held that chapter 550 did not preempt all tort theories involving trade secrets.
+
+"Chapter 550 has not preempted all tort theories involving trade secrets."[^q11-brandow-nonpreemption]
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> Do not use a non-compete as the only confidentiality tool. If the real concern is secrecy, draft targeted NDA, invention-assignment, and trade-secret provisions, then use chapter 550 remedies where the information meets the statutory definition and secrecy efforts can be proved [^q11-trade-secret-definition][^q11-injunctive-relief].
+
+[^about]: By Steven Obiajulu, J.D. Published by [openagreements.org](https://openagreements.org) · Maintained by [UseJunior](https://usejunior.com). Last reviewed 2026-06-02. License: CC BY 4.0. Steven Obiajulu, J.D. is admitted in New York, not Iowa. This article synthesizes Iowa primary law and is not legal advice from a Iowa-admitted attorney. This article is for informational purposes only and does not create an attorney-client relationship.
+
+[^q1-revere-three-prong]: **Revere Transducers, Inc. v. Deere & Co.** — "(1) Is the restriction reasonably necessary for the protection of the employer’s business; (2) is it unreasonably restrictive of the employee’s rights; and (3) is it prejudicial to the public interest?" *Revere Transducers, Inc. v. Deere & Co., 595 N.W.2d 751 (Iowa 1999).* <https://www.courtlistener.com/opinion/1989929/revere-transducers-inc-v-deere-co/#:~:text=(1)%20Is%20the%20restriction%20reasonably,prejudicial%20to%20the%20public%20interest%3F>
+
+[^q2-lamp-three-prong]: **Lamp v. American Prosthetics, Inc.** — "Because this case was tried in equity, our review is de novo. Iowa R.App.P. 4. In deciding whether to enforce a restrictive covenant, the court will apply a three-pronged test: (1) Is the restriction reasonably necessary for the protection of the employer’s business; (2) is it unreasonably restrictive of the employee’s rights; and (3) is it prejudicial to the public interest?" *Lamp v. American Prosthetics, Inc., 379 N.W.2d 909 (Iowa 1986).* <https://www.courtlistener.com/opinion/1601399/lamp-v-american-prosthetics-inc/#:~:text=Because%20this%20case%20was%20tried,prejudicial%20to%20the%20public%20interest%3F>
+
+[^q2-iowa-glass-burden]: **Iowa Glass Depot, Inc. v. Jindrich** — "The burden of proving reasonableness is upon the employer who seeks to enforce such a covenant." *Iowa Glass Depot, Inc. v. Jindrich, 338 N.W.2d 376 (Iowa 1983).* <https://www.courtlistener.com/opinion/2223795/iowa-glass-depot-inc-v-jindrich/#:~:text=The%20burden%20of%20proving%20reasonableness,to%20enforce%20such%20a%20covenant.>
+
+[^q3-revere-factors]: **Revere Transducers, Inc. v. Deere & Co.** — "Factors we consider in determining the enforceability of a noncompete agreement include the employee’s close proximity to customers, the nature of the business, accessibility to information peculiar to the employer’s business, and the nature of the occupation which is restrained." *Revere Transducers, Inc. v. Deere & Co., 595 N.W.2d 751 (Iowa 1999).* <https://www.courtlistener.com/opinion/1989929/revere-transducers-inc-v-deere-co/#:~:text=Factors%20we%20consider%20in%20determining,the%20occupation%20which%20is%20restrained.>
+
+[^q3-iowa-glass-general-skill]: **Iowa Glass Depot, Inc. v. Jindrich** — "An employee cannot be precluded from exercising the skill and general knowledge he has acquired or increased through experience or even instruction while in the employment." *Iowa Glass Depot, Inc. v. Jindrich, 338 N.W.2d 376 (Iowa 1983).* <https://www.courtlistener.com/opinion/2223795/iowa-glass-depot-inc-v-jindrich/#:~:text=An%20employee%20cannot%20be%20precluded,instruction%20while%20in%20the%20employment.>
+
+[^q3-ag-spectrum-support]: **AG Spectrum Co. v. Elder** — "In this context, Ag Spectrum’s support resembles the type of support that any reseller would expect to receive. Thus, like ordinary on-the-job training, Ag Spectrum’s training and support is not entitled to special protection." *AG Spectrum Co. v. Elder, 865 F.3d 1088 (8th Cir. 2017).* <https://www.courtlistener.com/opinion/4414551/ag-spectrum-company-v-vaughn-elder/#:~:text=In%20this%20context%2C%20Ag%20Spectrum%E2%80%99s,not%20entitled%20to%20special%20protection.>
+
+[^q4-ag-spectrum-court-question]: **AG Spectrum Co. v. Elder** — "For two reasons, we think that the Iowa Supreme Court would hold that the enforceability of a noncompete provision is a question for the court." *AG Spectrum Co. v. Elder, 865 F.3d 1088 (8th Cir. 2017).* <https://www.courtlistener.com/opinion/4414551/ag-spectrum-company-v-vaughn-elder/#:~:text=For%20two%20reasons%2C%20we%20think,a%20question%20for%20the%20court.>
+
+[^q4-pro-edge-one-year]: **Pro Edge, L.P. v. Gue** — "Further, the court finds that the covenant not to compete is not unreasonably restrictive in time or area. The non-compete clause does not prevent Dr. Gue from practicing in the field of veterinary medicine, nor even in the specialty of embryo transfer in livestock. It merely prevents him from doing so within 250-miles of a Trans Ova facility, and for only 1 year following his separation from employment." *Pro Edge, L.P. v. Gue, 374 F. Supp. 2d 711 (N.D. Iowa 2005).* <https://www.courtlistener.com/opinion/2397219/pro-edge-lp-v-gue/#:~:text=Further%2C%20the%20court%20finds%20that,following%20his%20separation%20from%20employment.>
+
+[^q4-ag-spectrum-unreasonable]: **AG Spectrum Co. v. Elder** — "Because requiring Elder to forsake the customers that he brought to Ag Spectrum as an independent contractor is unreasonable in the circumstances, we hold that the noncompete provision demanding this result is unenforceable." *AG Spectrum Co. v. Elder, 865 F.3d 1088 (8th Cir. 2017).* <https://www.courtlistener.com/opinion/4414551/ag-spectrum-company-v-vaughn-elder/#:~:text=Because%20requiring%20Elder%20to%20forsake,demanding%20this%20result%20is%20unenforceable.>
+
+[^q5-ehlers-reform]: **Ehlers v. Iowa Warehouse Co.** — "I. In view of the position we take here, it is unnecessary to discuss these propositions separately. We now overrule Brecher v. Brown (1945), 235 Iowa 627 , 17 N.W.2d 377 , and adopt the rule that unless the facts and circumstances indicate bad faith on the part of the employer, we will enforce noncompetitive covenants to the extent they are reasonably necessary to protect his legitimate interests without imposing undue hardship on the employee when the public interest is not adversely affected." *Ehlers v. Iowa Warehouse Co., 188 N.W.2d 368 (Iowa 1971).* <https://www.courtlistener.com/opinion/2117830/ehlers-v-iowa-warehouse-company/#:~:text=I.%20In%20view%20of%20the,interest%20is%20not%20adversely%20affected.>
+
+[^q5-farm-bureau-partial]: **Farm Bureau Serv. Co. of Maynard v. Kohls** — "The cause is remanded for entry of a decree properly restraining the defendant from competing with plaintiff as provided herein. Said injunction shall restrain defendant from activity competitive to plaintiff in the six townships he served in plaintiff’s employment, shall embrace only the activities defendant undertook in plaintiff’s employment and shall be for a period of two years from the date that employment was terminated." *Farm Bureau Serv. Co. of Maynard v. Kohls, 203 N.W.2d 209 (Iowa 1972).* <https://www.courtlistener.com/opinion/1935888/farm-bureau-service-co-of-maynard-v-kohls/#:~:text=The%20cause%20is%20remanded%20for,date%20that%20employment%20was%20terminated.>
+
+[^q5-ehlers-bad-faith]: **Ehlers v. Iowa Warehouse Co.** — "No covenant placed in the contract for reasons other than an attempt to protect the employer's legitimate interests should be enforced in equity." *Ehlers v. Iowa Warehouse Co., 188 N.W.2d 368 (Iowa 1971).* <https://www.courtlistener.com/opinion/2117830/ehlers-v-iowa-warehouse-company/#:~:text=No%20covenant%20placed%20in%20the,should%20be%20enforced%20in%20equity.>
+
+[^q6-ehlers-reform]: **Ehlers v. Iowa Warehouse Co.** — "I. In view of the position we take here, it is unnecessary to discuss these propositions separately. We now overrule Brecher v. Brown (1945), 235 Iowa 627 , 17 N.W.2d 377 , and adopt the rule that unless the facts and circumstances indicate bad faith on the part of the employer, we will enforce noncompetitive covenants to the extent they are reasonably necessary to protect his legitimate interests without imposing undue hardship on the employee when the public interest is not adversely affected." *Ehlers v. Iowa Warehouse Co., 188 N.W.2d 368 (Iowa 1971).* <https://www.courtlistener.com/opinion/2117830/ehlers-v-iowa-warehouse-company/#:~:text=I.%20In%20view%20of%20the,interest%20is%20not%20adversely%20affected.>
+
+[^q6-farm-bureau-fixed-period]: **Farm Bureau Serv. Co. of Maynard v. Kohls** — "The cause is remanded for entry of a decree properly restraining the defendant from competing with plaintiff as provided herein. Said injunction shall restrain defendant from activity competitive to plaintiff in the six townships he served in plaintiff’s employment, shall embrace only the activities defendant undertook in plaintiff’s employment and shall be for a period of two years from the date that employment was terminated." *Farm Bureau Serv. Co. of Maynard v. Kohls, 203 N.W.2d 209 (Iowa 1972).* <https://www.courtlistener.com/opinion/1935888/farm-bureau-service-co-of-maynard-v-kohls/#:~:text=The%20cause%20is%20remanded%20for,date%20that%20employment%20was%20terminated.>
+
+[^q7-farm-bureau-activities]: **Farm Bureau Serv. Co. of Maynard v. Kohls** — "First it appears the activities restricted were more than were necessary for plaintiff’s protection. Defendant was restricted from any ‘ * * * business activity competitive to that of the company * * It would be ample protection for the plaintiff in this case to restrict a former employee only from those activities he undertook during his employment. Similarly defendant was restricted from activity throughout a two county area. It would have sufficed to restrict him from the six townships he worked in. The trial court rightly held the covenant too broad both as to scope and area." *Farm Bureau Serv. Co. of Maynard v. Kohls, 203 N.W.2d 209 (Iowa 1972).* <https://www.courtlistener.com/opinion/1935888/farm-bureau-service-co-of-maynard-v-kohls/#:~:text=First%20it%20appears%20the%20activities,as%20to%20scope%20and%20area.>
+
+[^q8-farm-bureau-consideration]: **Farm Bureau Serv. Co. of Maynard v. Kohls** — "In Ehlers the contract was not executed until sometime after the employee went to work. The case might be distinguished by the concession in Ehlers that the matter was discussed when the job was undertaken. Ehlers is however authority for the proposition continuing employment for an indefinite period is sufficient consideration to support a covenant not to compete." *Farm Bureau Serv. Co. of Maynard v. Kohls, 203 N.W.2d 209 (Iowa 1972).* <https://www.courtlistener.com/opinion/1935888/farm-bureau-service-co-of-maynard-v-kohls/#:~:text=In%20Ehlers%20the%20contract%20was,a%20covenant%20not%20to%20compete.>
+
+[^q8-iowa-glass-consideration]: **Iowa Glass Depot, Inc. v. Jindrich** — "Thus, while his continued employment served as sufficient consideration for the restrictive covenant, we view Jindrich's gain from the contract to be grossly disproportionate to the injury he would sustain from enforcement of the restrictive covenant." *Iowa Glass Depot, Inc. v. Jindrich, 338 N.W.2d 376 (Iowa 1983).* <https://www.courtlistener.com/opinion/2223795/iowa-glass-depot-inc-v-jindrich/#:~:text=Thus%2C%20while%20his%20continued%20employment,enforcement%20of%20the%20restrictive%20covenant.>
+
+[^q9-mental-health-ban]: **Iowa Code § 147.161** — "An employer shall not enter into an agreement with a licensed mental health professional that limits the location at which the licensee may practice, prohibits the licensee from contacting for professional services a person previously treated by the licensee, or imposes a time restriction on the practice of the licensee." *Iowa Code § 147.161.* <https://www.legis.iowa.gov/docs/code/2025/147.161.pdf>
+
+[^q9-health-agency-ban]: **Iowa Code § 135Q.2** — "A health care employment agency shall not do any of the following: (1) Restrict in any manner the employment opportunities of an agency worker by including a noncompete clause in any contract with an agency worker or health care entity. (2) In any contract with an agency worker or health care entity, require payment of liquidated damages, employment fees, or other compensation if the agency worker is subsequently hired as a permanent employee of the health care entity." *Iowa Code § 135Q.2.* <https://www.legis.iowa.gov/docs/code/2025/135Q.2.pdf>
+
+[^q9-franchise-nonrenewal]: **Iowa Code § 537A.10** — "The franchisor completely withdraws from directly or indirectly distributing its products or services in the geographic market served by the franchisee, provided that upon expiration of the franchise, the franchisor agrees not to seek to enforce any covenant of the nonrenewed franchisee not to compete with the franchisor or franchisees of the franchisor." *Iowa Code § 537A.10.* <https://www.legis.iowa.gov/docs/code/2025/537A.10.pdf>
+
+[^q9-hf2254-uihc]: **2026 Iowa Acts, House File 2254** — "Develop a policy that prohibits the university of Iowa hospitals and clinics from including a noncompete clause in an employment contract with an advanced registered nurse practitioner, a licensed practical nurse, a pharmacist, a physician, a physician assistant, or a registered nurse." *2026 Iowa Acts, House File 2254 (codified at Iowa Code § 262.9(43)).* <https://www.legis.iowa.gov/docs/publications/LGE/91/HF2254.pdf>
+
+[^q9-mh-void]: **Iowa Code § 147.161** — "A provision of an agreement entered into between an employer and a licensed mental health professional prior to, on, or after June 1, 2023, that is contrary to this section shall be void and unenforceable." *Iowa Code § 147.161.* <https://www.legis.iowa.gov/docs/code/2025/147.161.pdf>
+
+[^q9-hf2254-effective]: **2026 Iowa Acts, House File 2254** — "This subsection applies to all employment contracts between an advanced registered nurse practitioner, a licensed practical nurse, a pharmacist, a physician, a physician assistant, or a registered nurse and the university of Iowa hospitals and clinics entered into, extended, or renewed on or after the effective date of this Act." *2026 Iowa Acts, House File 2254 (codified at Iowa Code § 262.9(43)).* <https://www.legis.iowa.gov/docs/publications/LGE/91/HF2254.pdf>
+
+[^q10-baker-sale-goodwill]: **Baker v. Starkey** — "In determining the question of reasonableness as to area and time, restrictive stipulations in agreements between employer and employee are not viewed with the same indulgence as such stipulations are between a vendor and vendee of a business and its good will." *Baker v. Starkey, 144 N.W.2d 889 (Iowa 1966).* <https://www.courtlistener.com/opinion/2202172/baker-v-starkey/#:~:text=In%20determining%20the%20question%20of,business%20and%20its%20good%20will.>
+
+[^q11-trade-secret-definition]: **Iowa Code § 550.2** — "‘Trade secret’ means information, including but not limited to a formula, pattern, compilation, program, device, method, technique, or process that is both of the following: a. Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by a person able to obtain economic value from its disclosure or use. b. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy." *Iowa Code § 550.2.* <https://www.legis.iowa.gov/docs/code/2025/550.2.pdf>
+
+[^q11-injunctive-relief]: **Iowa Code § 550.3** — "The owner of a trade secret may petition the district court to enjoin an actual or threatened misappropriation." *Iowa Code § 550.3.* <https://www.legis.iowa.gov/docs/code/2025/550.3.pdf>
+
+[^q11-damages]: **Iowa Code § 550.4** — "Damages may include the actual loss caused by the misappropriation, and the unjust enrichment caused by the misappropriation which is not taken into account in computing the actual loss." *Iowa Code § 550.4.* <https://www.legis.iowa.gov/docs/code/2025/550.4.pdf>
+
+[^q11-fees]: **Iowa Code § 550.6** — "The court may award actual and reasonable attorney fees to the prevailing party in an action under this chapter if any of the following is applicable: 1. A claim of misappropriation is made in bad faith. 2. A motion to terminate an injunction is made or resisted in bad faith. 3. A person acts willfully and maliciously in the misappropriation." *Iowa Code § 550.6.* <https://www.legis.iowa.gov/docs/code/2025/550.6.pdf>
+
+[^q11-brandow-nonpreemption]: **205 Corp. v. Brandow** — "Chapter 550 has not preempted all tort theories involving trade secrets." *205 Corp. v. Brandow, 517 N.W.2d 548 (Iowa 1994).* <https://www.courtlistener.com/opinion/1312295/205-corp-v-brandow/#:~:text=Chapter%20550%20has%20not%20preempted,tort%20theories%20involving%20trade%20secrets.>