Home » Commentary » What is Blue Penciling, and How Does It Affect Connecticut Employees With Non-Competes?

Amanda DeMatteis: Hi, Josh.

Josh Goodbaum: Hi, Amanda. What are we talking about today?

DeMatteis: We’re gonna talk about non-competes – something that we cover quite a bit on these videos, but it comes up a lot. We see potential clients from Connecticut, or even other states, that come to us, and they’re questioning whether or not a non-compete they have is enforceable.

So what do they do? They google it, like everything else, and they find a term called “blue penciling.” And they come to us and say, “Well, Connecticut blue pencils, and that’s good for me, right?” But they usually don’t understand what the term means.

I thought you could explain for our viewers: What’s “blue penciling,” and how does it impact a Connecticut employee who has a non-compete?

Goodbaum: In general, blue penciling is good for employers trying to enforce non-competes, not for employees trying to get out of them. So, that’s the first thing.

But let’s back up.

The term “blue penciling” actually comes out of the 19th century practice of editing documents – not just legal documents but any kind of writing – using a pencil with lead that was dyed blue so that the printers could tell what was original and what was a later addition. And the legal concept grows out of that 19th century editing practice.

The term “blue penciling” refers to over-broad provisions of contracts being rewritten so they can be narrow enough to be enforceable. We often see it in the context of non-competes and other restrictive covenants, like non-solicits or non-service agreements. And whether blue penciling is allowed is going to be a question of state law. So, I’m going to tell you the answer in Connecticut, but other states might have other answers.

In Connecticut, blue penciling is allowed – that is, a court or an arbitrator is allowed to rewrite an over-broad clause that would not otherwise be enforceable – if the contract says you can. Often a non-compete will have a provision that says something like, “The parties want this clause to be enforceable. If a judge or arbitrator determines that the clause is too broad to be enforceable, the parties are asking the judge or arbitrator to rewrite the clause to make it as enforceable as it can be under the law.”

Even if you have a clause like that, though – that is, a blue penciling clause that expressly permits the judge or arbitrator to blue pencil the clause – there’s still going to be a dispute between lawyers in Connecticut who do restrictive covenant work about the scope of blue penciling.

On the narrow side are those who believe that blue penciling is allowed only when the court is crossing out provisions. And on the broader side are those who think that blue penciling allows for a complete rewrite of a clause.

Let me give you an example. Imagine a clause that says, “You cannot compete with us in Hartford, West Hartford, Avon, Simsbury, Farmington, East Hartford, and Weathersfield.” The court might see that clause and say, “You know what? I think those outer towns go too far. I’m gonna cross out Simsbury and Weathersfield and leave the rest.” That would be the narrow version of blue penciling because the court is just crossing out.

But imagine if, instead, the clause said, “You cannot compete with us within 25 miles of Hartford.” Well, the court might say, “I think 25 miles is too far. I would have been willing to enforce five miles, but you didn’t give me that option, right? I would have to rewrite the clause to do it, and I’m not going to do that because I don’t think blue penciling allows me to rewrite. I could have crossed out, but I’m not going to rewrite.”

So, that’s the dispute. My view for what it’s worth is that only crossing out is allowed, not rewriting.

Relatedly, sometimes you will see non-competes that are written in a strange way because of this understanding of blue penciling. They might say something like, “You can’t compete within 25 miles, and if not 25 then 20, and if not 20 then 15, and if not 15 then 10, and if not 10 then 5.” And the reason they do this is because the lawyer drafting the provision wants to ensure as much as possible that the court will do the blue penciling of striking out the provision – that is, that the judge will find that the different pieces of the geographic restriction are what’s called severable or that they make sense separate from one another.

Now, I should say here that judges and arbitrators have a lot of discretion about whether to engage in blue penciling. And some of them just think blue penciling is a really bad idea. They’re skeptical of the practice, and you could sort of understand why, because it creates really perverse incentives for employers. If an employer can have a non-compete that says, “You can’t compete with me anywhere in the world,” and the court is going to come back and say, “No, no, it’s just 25 miles,” well, then the employer is getting a lot of prevention with an over-broad non-compete that couldn’t be enforced, and it’s scaring away employees who don’t have the instinct, the nerve, or the resources to challenge that non-compete.

DeMatteis: So, in the alternative of blue penciling, then the non-compete or that section of the employment agreement that includes the non-compete would simply be unenforceable, right?

Goodbaum: Well, that’s a little complicated, but basically yes.

If the non-compete has a geographic provision – for example, a mileage restriction – that is unenforceable and cannot be rewritten, then the whole non-compete will fall. In other words, the whole non-compete will be crossed out because that geographic restriction is inseparable from the broader non-compete.

But that doesn’t mean that the whole agreement in which the non-compete exists – an employment contract, for example – will be unenforceable. As long as the non-compete is separable from the rest of the contract, then you would just cross out the non-compete, you would ignore it, and the rest of the contract would hold. And that’s the doctrine of what we call “severability,” which is the issue of whether a broader document makes sense without the piece that is unenforceable.

DeMatteis: Really useful information. Thank you, Josh, and thank you for watching. If you have questions, give us a call. Take care.

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