The Indiana Supreme Court recently provided important guidance for employers looking to hold employees accountable for breaching non-solicitation clauses in employment agreements by providing for liquidated damages. In its December 18, 2019, majority opinion in American Consulting, Inc. d/b/a American Structurepoint, Inc. v. Hannum Wagle & Cline Engineering, Inc. d/b/a HWC Engineering, Inc. et al. (“ASI”), the Court found that the liquidated damages provisions in employees’ employment agreements were facially unreasonable and unenforceable and were not correlated to the employer’s actual loss.
In ASI, the relevant contract provisions for one former employee provided as follows:
• For two years after employment, the employee will not sell, provide, try to sell or provide or assist any person or entity in the sale or provision of any competing products or services to the employer’s customers with whom the employee had any business contact on behalf of the employer during the two years prior to his separation from employment. A breach of this provision that results in the termination, withdrawal or reduction of a client’s business with the employer will result in liquidated damages equal to 45% of all fees and other amounts that the employer billed to the customer during the 12 months prior to the breach.