Void Agreements, Knocked-out Terms, and Blue Pencils: Judicial and Legislative Handling of Unreasonable Terms in Noncompete Agreements


This article adresses the divergent approaches currently taken by courts after finding an unreasonable term in an employer-employee noncompete agreement. The article begins by reviewing basic standards used to determine if the terms of a noncompete agreement are reasonable. The article then addresses and analyzes the three approaches used by courts after finding an unreasonable term: finding the agreement void in its entirety, using the "Blue Pencil" doctrine to eliminate unreasonable terms and enforce the remaining terms, and using the court's equitable powers to not only remove unreasonable terms, but to rewrite those terms to make them reasonable. The article also addresses the divergent approaches taken to the requirment of consideration for noncompetes signed after commencement of employment and how a jurisdiction's choice on that issue affects the remedy analysis. The article concludes by proffering a proposed statute that encourages employers and employees to regularly review and update the noncompete agreement.


Labor and Employment Law

Date of this Version

December 2006