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Are non-compete clauses fair? One court weighs in

Some of our more frequent readers here in Indiana may remember a November 2012 post in which we touched on the topic of non-compete clauses. In the post, we explained that non-compete clauses within an employment contract bars an individual from leaving a place of employment and accepting a position with another company that is deemed a competitor. While breaking these non-compete clauses can lead to sometimes fierce litigation, a recent case out of California this month questioned the legality of such clauses, siding in favor of the employee rather than the contract.

For those unfamiliar with the court case, a doctor had a contract with an outside management company, working in a hospital in its neonatal unit. But when the hospital got a new CEO that didn’t like outside management companies, the doctor quit from the firm and accepted a full-time position within the same hospital. Soon after, the firm sued the doctor and the hospital for violating the terms of his non-compete agreement.

But according to a recent court ruling, the doctor and hospital were well within their rights to change the arraignment of employment because of state laws, which "favors the freedom of an employee ... to compete with competitors in a free market place."

Because of the legally binding nature of employment contracts in Indiana and how our state laws are written, it’s important for our readers to understand that not all cases may have this favorable of an outcome. If a similar situation were to arise here, then a person would be strongly urged to speak with an attorney knowledgeable with the state’s laws and how they relate to employment contracts, especially if the person is taken to court because of non-compete clauses.

Source: The Modern Physician, "Calif. hospital skirts non-compete rule, hires neonatologist," Joe Carlson, Aug. 14, 2013

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