States around the country vary in how they approach the enforcement of unreasonable non-compete agreements. While the majority of states allow their courts to “blue pencil” or rewrite restrictive covenants to make them reasonable, three states do not permit such reformation, and four states have no clear legal guidance on whether blue-penciling is permitted, leaving employers in limbo.
However, even in those states where the courts routinely blue-pencil non-compete agreements, employers should not rely on that procedure for several reasons:
- Blue-penciling is expensive as it can only be done after a lawsuit is filed;
- Blue-penciling is unpredictable because it is up to the judge assigned to the case what he or she considers to be reasonable;
- Blue-penciling can result in an employer not being able to recover damages caused by a breach of a non-compete agreement that occurred prior to a court rewriting the agreement.
Thus, it is always best to draft a reasonable non-compete agreement rather than to rely on the blue pencil doctrine and hope that a court will “fix” the agreement when the time comes.
Leiza Dolghih is a partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice. Her practice includes commercial, intellectual property and employment litigation. You can contact her directly at Leiza.Dolghih@LewisBrisbois.com or (214) 722-7108.