Wyoming Supreme Court Counters Overly Broad Employee Non-Compete Agreements

In Hassler v. Circle C Resources, the Wyoming Supreme Court opted not to reform or revise an ill-defined contractual term in an employee non-compete agreement.   In some contexts, this judicial act is known as applying a “blue pencil” to the overly broad term, thereby saving it through narrowing its applicability.

At issue was a term that prohibited the employee from competing for two years in “any geographic area in which employer markets or has marketed its services during the year preceding separation from employment, including but not limited to” more than one Wyoming counties.

After invalidating such language, the trial court in the case wielded its blue pencil powers, limiting the validity of the non-compete restrictions to two counties geographically and one year in duration (since 1993, Wyoming has permitted courts to “blue pencil” employee non-compete agreements).  Ultimately, the employer received approximately $100,000 in damages, whereupon the employee appealed.

On appeal, the Wyoming Supreme Court disavowed the trial court’s decision to apply a “blue pencil” to the contested non-compete contract, determining that such an approach did not comport with the ordinary contract principle that a court should not “rewrite” a poorly drafted contract for the parties.

Holding that “in practice, the blue pencil rule places an unfair burden on employees and creates uncertainty in business relationships,” based on the general imbalance of power between employer and prospective employee at the time of hiring (when non-compete agreements are typically executed), the Wyoming Supreme Court observed that the “blue pencil rule further tips the scales toward employers by encouraging them to draft noncompete agreements with overly broad and unreasonable trade restraints.”  Consequently, the employer receives a “free ride on a contractual provision that the employee is aware . . . would never be enforced.”   Ultimately, both parties to such agreements may “rely, with any assurance, on the specific terms of the agreements they execute.”

Besides rejecting the earlier adoption of the blue pencil rule, the Wyoming Supreme Court rejected such approach even in instances where the legal agreement expressly permits a court to reform the overly-broad non-compete.

Do you need a review of the non-compete provisions in your legal agreements?   Are you hoping to get a better sense of the risks you face in this area?  If so, please reach out to a White Plains Non-Compete Agreement attorney to set up an introductory consultation.