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No more "blue pencil rule" to reform
unreasonable
noncompete agreement
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Hassler v. Circle C
Resources (Wyoming 02/25/2022)
http://case.lawmemo.com/wy/hassler.pdf
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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