Blue Pencil Clause: Everything You Need to Know
A blue pencil clause allows for a court to step in and revise overly broad language in contracts and provisions, making them more enforceable. 3 min read
A blue pencil clause allows for a court to step in and revise overly broad language in contracts and provisions, making them more enforceable. This is commonly seen within the scope of non-compete clauses that may exist in employment contracts as often times there is language that is not going to be considered valid. In these situations, the courts can essentially do one of three things:
- Throw out the entire covenant, which is sometimes called a, “red pencil” doctrine.
- Eliminate only those parts of the contract that are not really enforceable. This is typically known as the blue pencil doctrine or divisibility doctrine.
- Make the rewrites themselves in a way that is both clear and in keeping with the laws of that jurisdiction.
It may be difficult to clearly see the difference between the second and third avenues which the courts can take. Consider a non-compete clause in your employment contract that states that should you leave the company, you cannot work for a competing company in a 20 mile radius for a period of up to five years. While the terms are clearly spelled out, in most cases, this would be unenforceable. Which then begs the question: how would a court handle this?
The fastest and easiest way for a court to address this would be with the red pencil doctrine, thus just throwing it out, completely. Chances are, though, that this will not be how it gets handled, as courts do not actually employ this method very often. In fact, there are only three states that are largely known to go this route, and they are Virginia, Arkansas and Nebraska.
It is more likely that the courts will take another approach, and change the restriction of five years to something a bit more reasonable, like one year. The courts may see this as being equitable for both parties, as the company does not have to worry about a former employee immediately going to a rival business and taking their expertise with them, but the employee is not in a position of having their hands tied for five years.
If neither of these options will do, then the courts may employ the blue pencil method, which is to eliminate the parts of the clause that are not considered enforceable, while keeping the rest of it, as is. Now, in the case of the example cited above, the blue pencil and the red pencil will ultimately have the same effect. However, if the non-compete clause stated that you could not work for a competitor in your state or any of the immediately neighboring states, then the blue pencil doctrine may eliminate that stipulation of not working in other states and only apply it to the state in which you had been working.
Non-compete clauses can be both difficult to enforce and to fight. As such, if you are in a position of wanting one included in an employment contract, it is advisable to seek legal counsel to ensure that the clause will be enforceable. Additionally, if you are in the position of signing an employment contract that contains a non-compete clause, you will want to be sure that you are clear as to what the parameters are of that clause and what your rights will be, should you ever choose to challenge it.
More on the Blue Pencil Rule
The language in the non-compete clause can have a large impact on whether or not the blue pencil rule can be applied, or if it even needs to be. For example, let’s say you have signed a non-compete clause that prohibits you from working in marketing for a competitor within a 50 mile radius, but then you obtain a position in human resources for a competitor. In such an instance, the blue pencil rule would not apply, as your new job does not fall within the scope of the non-compete clause. However, if the non-compete clause was worded with something like, “marketing, in any and all capacities”, then the courts could potentially apply the blue pencil rule as that verbiage may be considered too broad and could include disciplines such as sales, public relations and advertising.
It is worth noting that the blue pencil rule does not provide the courts the ability to start adding their own terms or restrictions to the clause or contract.
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