31 Mar Noncompete agreements in North Carolina

How far can a judge go in striking unreasonable terms?

The North Carolina Supreme Court recently clarified the limited power judges have to strike unreasonable terms in noncompete agreements.¹ Citing historic case law, the Court made clear that judges are not at liberty to rewrite contracts for the parties. There remains one exception to this general principle known as the “blue-pencil rule.” This rule permits the Court not to enforce certain sections of an agreement that it finds to be unreasonable.

The blue-pencil rule does not allow a judge to rewrite the terms of a contract or cross out a term to make a new provision. This rule simply allows the judge to refuse to enforce certain sections of a noncompete agreement that are unreasonable.

The blue-pencil rule is most commonly used with territorial restrictions that attempt to prevent a former employee from working in certain geographic areas. If several different territorial areas are listed in distinct and separate provisions, the court can “blue-pencil” or refuse to enforce specific territories that are overly board.  However, if only one restricted territory is listed in the agreement, the judge has no power to revise that provision.

Noncompete agreements are rarely straightforward, and there are often many loopholes that can leave them unenforceable. If you have questions about a noncompete agreement, attorney Adam Hocutt has experience litigating these issues in North Carolina courts.

1. Beverage Sys. of the Carolinas, LLC v. Associated Bev. Repair, LLC, 2016 N.C. LEXIS 177 (N.C. Mar. 18, 2016)