Blue Pencilling and State Laws: A Guide to Non-Competes

Blue pencilling is a crucial concept in the context of non-compete agreements. In most states, courts have the power to modify or "blue pencil" non-compete clauses that are deemed overly broad or restrictive.

Some states, however, have specific laws that govern the blue pencilling process. For example, California law prohibits the enforcement of non-compete agreements, while Illinois law allows blue pencilling but only to the extent that the clause is deemed reasonable.

Courts will often consider factors such as the length of time the non-compete clause is in effect, the geographic scope of the restriction, and the type of business or industry involved.

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Blue pencilling is a legal term that allows parts of a contract to remain enforceable while other parts are deemed unenforceable. This rule is also known as the blue pencil doctrine.

The blue pencil rule is a metaphorical concept where a judge uses a blue pencil to edit or excise the unenforceable sections of a contract. This rule is not meant to change the original meaning of a contract.

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The blue pencil doctrine is primarily used in contract law to modify or strike out certain portions of a contractual agreement while leaving the remainder of the contract intact and enforceable. This doctrine is often employed in cases involving non-compete clauses or restrictive covenants.

The blue pencil doctrine should be considered when dealing with contracts that contain provisions which could potentially be unenforceable due to being overly broad, vague, or unreasonable. This is particularly relevant in employment contracts, partnership agreements, and confidentiality agreements.

Courts will employ the blue pencil doctrine to ensure that the valid and enforceable portions of the contract remain in effect, thereby maintaining the original intent and fairness of the agreement without causing hardship to one party.

The blue pencil rule does not provide the courts the ability to start adding their own terms or restrictions to the clause or contract, it only allows them to modify or strike out certain portions of a contractual agreement.

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The legal aspects of blue pencilling are crucial to understand, as they can make or break the enforceability of a contract. Courts generally adopt one of three approaches when considering the enforceability of blue pencil provisions.

The strict blue pencil rule is one approach, where courts can strike out unenforceable parts of a contract, but will not add or modify any terms to make the contract valid. This means that even if some parts of the contract are invalid, the remaining portions must still make sense on their own.

The permissive blue pencil rule gives courts more flexibility, allowing them to modify the terms of a contract to make it enforceable. This can include narrowing the scope of a non-compete clause that is too broad.

Some jurisdictions do not allow courts to modify or strike out parts of a contract, adopting the no blue pencil rule. If a provision is unenforceable, the entire contract or clause may be invalidated.

Here are the three approaches to blue pencil provisions, summarized:

Understanding which approach a court may take is crucial for drafting enforceable contracts. It's recommended that businesses and individuals work with legal professionals to ensure that their contracts are compliant with the applicable laws in their jurisdiction.

Non-compete clauses are often subject to blue pencil provisions. A court might reduce a clause restricting a former employee from working in a competing business for five years across the entire country to one year and limit the geographic scope to the specific region where the employee worked.

Confidentiality agreements are another common application of blue pencil provisions. If a provision is too broad in defining what constitutes confidential information, a court may limit it to specific categories of information that are necessary to protect legitimate business interests.

Severability clauses are often drafted with blue pencil provisions in mind. These clauses typically state that if one part of the agreement is found to be unenforceable, the remainder of the agreement will still be enforceable.

Courts may apply the blue pencil doctrine to sever the unenforceable parts while keeping the rest of the contract intact. This is often the case in non-compete agreements, where a court might reduce an inordinately long time specified in a contract.

The blue pencil rule is used to examine and deliberate the restrictions in a contract, depending upon the evidence and the individual circumstances of the case. States vary in how they view the blue pencil rule in business law.

Here are some examples of blue pencil provisions:

In some states, the blue pencil rule refers only to striking out offending words or phrases without making any other changes.

State laws vary when it comes to non-compete agreements, and that's where reformation comes in.

In some states, a court can re-write a non-compete to make it enforceable, which is known as reformation. This means the court will add new language to the agreement while keeping the original intentions of the parties in mind.

Reformation is a more flexible approach compared to blue-penciling, which strikes out language in a non-compete to make it enforceable. If a non-compete cannot be made legal through blue-penciling, the entire agreement is void.

Courts use reformation to ensure the non-compete agreement is fair and reasonable, and that it doesn't unfairly restrict an employee's ability to work.

If a court decides to reform a non-compete, the revised agreement will be enforceable in the state, and the original language will be ignored.

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The Blue Pencil Rule is a contentious issue, particularly in employment contracts. Many companies rely on non-compete contracts to protect their interests, but employees argue that these restrictions are often overly broad and an overreach by an employer.

The Blue Pencil Rule is relevant in employment contracts, partnership agreements, and confidentiality agreements. Courts will employ the doctrine to ensure that the valid and enforceable portions of the contract remain in effect, maintaining the original intent and fairness of the agreement.

The Blue Pencil Rule is used to edit out offending portions of a contract, allowing the remaining parts to remain enforceable. This is done by striking out the offending parts with a blue pencil, which doesn't show up in lithographic or photographic reproduction processes.

Courts invoke the Blue Pencil Rule on a strict case-by-case basis, as legislatures in states that allow the rule have deemed it necessary to regulate the use of non-compete contracts. Many employees argue that these contracts are often used to restrict their future business endeavors unfairly.

Here are some examples of where the Blue Pencil Rule is particularly relevant: