Friday, April 23, 2010
5. What to do with overbroad covenants?
In § 8.08, the draft Restatement adopts a version of the “blue pencil” rule for overbroad covenants. I’ve addressed this question at length in a forthcoming article in Ohio State, and I recognize that this draft has made some efforts to meet the concern that this approach incentivizes overbroad covenants. It says that partial enforcement should occur only when the employer had a reasonable, good faith belief in the clause's legality and provides in the blackletter that lack of such a belief “may be manifested by overbreadth alone, if sufficiently egregious, or by overbreadth in connection with other evidence showing that the employer was not seeking to protect is legitimate interests.”
This is, admittedly, a substantial step forward. But, perhaps needless to say, I don’t think it goes far enough, and I’m not persuaded by the rationale that, but for the blue pencil escape hatch, courts will enforce as written covenants they believe to be too broad. While that this is a problem, the law's focus on the few covenants litigated continues to empower employers to overreach in the tens of thousands of post employment restraints that are never litigated.