Brand New Case Law
In February 2022, the Wyoming Supreme Court issued a decision in Hassler v. Circle C. Resources that drastically changed the landscape of non-compete agreements in Wyoming. Since 1993, Wyoming courts followed the “liberal blue pencil” approach when confronted with non-compete agreements that created an unreasonable and unenforceable restriction on trade. This approach allowed courts to narrow and reform the terms of unreasonable non-compete agreements to make them reasonable. Following Hassler, courts will no longer use the blue pencil rule, and non-compete agreements that include unreasonable restrictions are invalid and unenforceable.
Pillars of Enforceable Non-Compete Agreements
To be enforceable, a non-compete agreement must be (1) in writing; (2) part of a contract of employment; (3) based on reasonable consideration; (4) reasonable in duration and geographical limitations; and (5) not against public policy. Since non-compete agreements are a restraint on trade, they are presumed to be against public policy and the employer has the burden of proving that special circumstance exist which make the restraint on trade reasonably necessary to protect the employer’s business. However, the Wyoming Supreme Court’s decision in Hopper v. All Pet Animal Clinic (1993), which adopted the “liberal blue pencil” approach for non-compete agreements and was subsequently overturned by Hassler, created an environment that encouraged employers to draft overly broad and unreasonable non-compete agreements knowing they would be narrowed to what the court deemed “reasonable” upon enforcement. In overturning Hopper, Wyoming courts will now return to the pre-1993 “all or nothing” approach where the entire non-compete agreement is void if any part is unreasonable or unenforceable.
Take Caution When Restricting Employment Contracts
Employers should carefully consider and reevaluate restrictive provisions in employment contracts to ensure any restraints on trade imposed by the agreement are reasonably necessary to protect the interests of the business.