In North Carolina, an enforceable non-competition agreement must be reasonable in terms of time and geographic limitations, and not exceed protection of the employer’s legitimate business interests.  A new North Carolina Court of Appeals case demonstrates how boilerplate language in a non-compete that seeks to cover the employer’s affiliates may render the entire agreement unenforceable.

In Medical Staffing Network v. Ridgway, the plaintiff sued a former employee who resigned to work for a direct competitor, soliciting employees and clients despite the existence of a written non-competition agreement prohibiting such conduct.  In response, the employee and new employer contended that the non-compete agreement was unenforceable on it face, because it defined prohibited competition as including “any parent, division, subsidiary, affiliate, predecessor, successor, or assignee” of the employer.

The Court of Appeals agreed, reversing the trial court’s judgment for the plaintiff. The court concluded that the non-compete was facially overbroad because it was not limited to attempting to protect the actual employer’s interests.  The affiliates included in the agreement would have prevented the former employee from working for a range of companies that have nothing to do with the work he actually performed for his former employer.

The court reached this conclusion despite the fact that the employee actually went to work for a direct competitor of the plaintiff.  This did not change the fact that the non-compete agreement as written was overbroad and therefore per se unenforceable.  Although unexplained in the decision, the court also refused to “blue pencil” (delete) the offending language from the agreement, preserving the remainder.  Employers in North Carolina that use non-competition agreements should review them to make sure that the restrictions are limited to the actual work done by the company and employee subject to the restrictions.