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No more "blue pencil rule" to reform
unreasonable noncompete agreement

Hassler v. Circle C Resources (Wyoming 02/25/2022)
Sent to Custom Alerts™ subscribers on 02/26/2022

Doing an important about-face, the Wyoming Supreme Court now holds that it will not allow courts to use the "blue pencil rule" to redraft an unreasonable noncompete agreement so as to narrow it to a reasonable level.

The employer sued a former employee to enforce a noncompete agreement. As written, the agreement was unreasonable both in its geographic scope and its duration. The agreement included many counties where the employer did not conduct business, and had a duration of 24 months.

The trial court used the "blue pencil rule" to narrow the restrictions to a reasonable level – only certain counties, and only for 12 months – and awarded damages to the employer.

The Wyoming Supreme Court reversed.

Prior to Hopper v. All Pet Animal Clinic, 861 P.2d 531 (Wyo. 1993), noncompete agreements with unreasonable terms were unenforceable in Wyoming, but in Hopper the court said courts may narrow the terms of noncompete agreements to make them reasonable.

Now the Wyoming Supreme Court has overruled Hopper's adoption of the blue pencil rule.

"Returning to our roots, a noncompete agreement which includes unreasonable restrictions on trade violates public policy and is invalid. The employer has the duty of proving all the terms of the noncompete agreement are reasonable and, therefore, enforceable. Wyoming courts will no longer exceed the scope of their traditional authority in contract interpretation by redrafting noncompete agreements to bring them within the bounds of reason."

"Because there is no dispute that the duration and geographical terms of the noncompete agreement are unreasonable and we no longer permit use of the blue pencil rule to make noncompete agreements reasonable, we conclude the entire agreement is void in violation of public policy."

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