One Size Doesn't Fit All: Tailoring Restrictive Covenants To Your State's Law

Because the laws vary from state to state, what may be a reasonable restriction in one state may be considered overreaching (with respect to geographic scope, duration, activities covered, or otherwise) in another

Howard J. Rubin (hrubin@dglaw.com)
Raphael Lee (rlee@dglaw.com)

e-mail this article URL

Some employers have run into trouble by having employees in one state sign non-competition agreements designed for employees in another state. The enforceability of restrictive covenants vary according to the laws and customs of each particular state. Failing to tailor a restrictive covenant for the state in which it is being used may result in having a worthless and unenforceable covenant – and a frustrated employer. Because the laws vary from state to state, what may be a reasonable restriction in one state may be considered overreaching (with respect to geographic scope, duration, activities covered, or otherwise) in another. Courts in some states will provide an employer some protection, even if it has an overbroad restrictive covenant because they will "blue pencil" – i.e., edit or rewrite – its unenforceable aspects down to something that is enforceable under the law of that state. But employers cannot rely on courts to do their tailoring for them because some states, such as California and Georgia, will not "blue pencil" or save restrictive covenants. If any aspect of a non-competition agreement in such a state is deemed to be overbroad, the whole agreement may be voided. Similarly, states differ in the extent to which courts will "blue pencil" restrictive covenants. Some may actually rewrite provisions to make them enforceable, while others may only sever distinct clauses from an agreement. An employer might have, for example, a non-compete or non-solicit agreement that is enforceable in New York, but a Georgia court could find the same agreement to be overbroad (e.g., with respect to the activities covered), and could therefore void the entire covenant.

Therefore, before having an employee sign a restrictive covenant of any kind, employers should make sure that the agreement has been tailored to the law of the state in which the employee actually works. It is not enough for the agreement to merely provide that the contract will be governed by the law of a state where the agreement would be enforced – the agreement must be tailored to the law of the state in which the employee works.

Please contact your Davis & Gilbert attorney if you have questions about your restrictive covenants.


© 2001 Davis & Gilbert LLP