Conscientious Drafting of Employment Agreements Remains Imperative as North Carolina Supreme Court Reaffirms its “Strict Blue-Pencil Doctrine” for Restrictive Covenants
North Carolina courts continue to be limited from revising unenforceable covenants not to compete as the North Carolina Supreme Court reaffirms its limited application of the “blue pencil doctrine.” The Court, in rejecting the North Carolina Court of Appeals decision in Beverage Systems of the Carolinas, LLC v. Associated Beverage Repair, LLC, held that application of a “strict blue-pencil doctrine” in the restrictive covenants context limits courts by only allowing them to merely strike overly broad or unreasonable provisions rather than change, re-write, re-word, or add to them, regardless of if the agreement explicitly allows the courts such revision power.
The restrictive covenant in Beverage Systems of the Carolinas contained such a revision clause that, according to the Court of Appeals, would purportedly allow the court to revise the parties’ potentially over-broad time and territory restrictions. The territory restriction clause was found to be unreasonable due to its inclusion of areas beyond those “necessary to maintain plaintiff’s customer relationships,” however upon review, the Supreme Court refused to allow the court to amend or revise the terms of the unreasonable provision.
By directly rejecting the Court of Appeals’ decision, the North Carolina Supreme Court solidified the strict application of the blue pencil doctrine in the employment contract setting. The courts of North Carolina will not rescue careless contract drafters from their overreaching and unreasonable clauses. It is thus crucial that you employ an attorney who will avoid drafting errors and overreaching terms, as well as include clauses in your agreement that comply with North Carolina’s reasonableness requirements regarding time and territory restrictions and that are narrowly tailored to account for your business’ most important interests.