As evidenced by a recent North Carolina Court of Appeals decision, employers in North Carolina cannot rely on courts to salvage overbroad noncompete agreements. In the specific case, the Court of Appeals refused to enforce a restrictive covenant that prohibited nurse practitioners from "practicing medicine." 

The takeaways for the healthcare industry are clear: a covenant prohibiting a physician or advanced practice provider from "engaging in the practice of medicine" may not be enforceable in North Carolina. As courts in North Carolina require that a noncompete be no broader than necessary to protect a legitimate business interest, healthcare employers should define prohibited activities with precision.

For all employers, the decision emphasizes that North Carolina courts will not rewrite expansive restrictions to make them enforceable and offers important drafting lessons for employers using noncompete agreements across industries. 

Case Background

The nurse practitioners primarily worked in the plaintiff's outpatient cardiology clinic. After leaving their employment, both defendants accepted positions with a provider of primary care, behavioral health, and substance use disorder treatment. Although the new positions fell within the geographic scope of the noncompete provisions, the job responsibilities involved different clinical services than the defendants had provided for the plaintiff.

The trial court held that the covenants were "too broad to constitute a reasonable protection of the plaintiff's business interest, inasmuch as they restrict Defendants from practicing medicine."  Although the defendants challenged the covenants on several additional grounds (including geographic scope and length of the prohibition, lack of consideration, and public policy), the trial court limited its opinion solely to the scope of prohibited activities. The Court of Appeals affirmed.

The Court of Appeals emphasized that North Carolina evaluates the reasonableness of restrictive covenants based not only on geographic scope and duration, but also on the scope of the prohibited activities. The court concluded that the covenants extended far beyond the services the defendants performed on behalf of the plaintiff, effectively preventing them from practicing medicine in any capacity regardless of specialty, title, or job responsibility. 

According to the court, compliance with the covenants would have required the defendants to cease "any work remotely related to the practice of medicine or operation of a healthcare facility," making the restrictions substantially more expansive than necessary to protect the plaintiff's interests. 

The Court of Appeals acknowledged that healthcare employers have legitimate interests in protecting confidential information, trade secrets, patient relationships, and goodwill. Although the complaint alleged that the defendants had access to confidential information and that patients followed them after leaving, the Court of Appeals found those allegations insufficient to support enforcement of the covenant not to compete because the employer failed to identify any specific confidential information or trade secrets justifying a broad prohibition on any practice of medicine. Likewise, protecting patient relationships did not justify entirely preventing the defendants from practicing medicine. The Court of Appeals reiterated that restrictive covenants cannot be used simply to eliminate ordinary competition, but must be tailored to protect a legitimate interest of the employer.  

What the Court Said About 'Blue Pencil' Doctrine

Recognizing that the phrase "engage in the practice of Medicine" was the principal source of the overbreadth, plaintiff asked the Court of Appeals to "blue-pencil" the covenant by deleting that language and enforcing only the remainder of the restriction. 

In the case involving the nurse practitioners, the Court of Appeals refused deletion, finding that the proposed strike would create a new covenant, and specifically, that the clause "engage in the practice of Medicine" was not grammatically severable from the remainder of the restriction.  Specifically, the Court of Appeals held that because the plaintiff was not merely asking the court to strike a separate divisible clause, but instead to revise the sentence to create a narrower covenant, the requested modification exceeded North Carolina's  blue-pencil authority.  

Key Takeaways for Employers 

In light of the court’s decision, employers should consider the following:

• Avoid reliance on judicial modification to cure overbroad provisions in noncompete provisions, and where it is the intent to allow the court to blue-pencil, to ensure that language is grammatically severable.
   
• North Carolina's blue-pencil doctrine remains limited. Although North Carolina courts may strike clearly severable language from an overbroad restrictive covenant, they will not rewrite, rearrange, or selectively edit contractual language to create an enforceable restriction the parties did not draft. 

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