Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
The Colorado Court of Appeals recently decided an issue of first impression regarding noncompetition and nonsolicitation agreements. The decision in 23 LTD v. Herman highlights an important consideration for Colorado restrictive covenants: it is the parties’ job to craft narrow agreements, and they cannot count on the courts to step in and rescue an otherwise overbroad agreement.
The question in Herman was when, if ever, is a Colorado court required to “blue pencil” (i.e., modify) a noncompetition or nonsolicitation agreement? In earlier proceedings, the trial court and another appellate decision had determined that the nonsolicitation clause was “fatally overbroad” because it effectively prohibited the employee from contacting any person or entity, in any of the industries the employer provided recruiting services for, if that person or entity had contact with any of the employer’s employees. The employer argued the trial court was required to blue pencil the agreement. The appellate court roundly rejected the idea that a blue pencil clause in a private agreement can obligate judges to narrow otherwise overbroad restrictive covenants. “Simply put, the court is not a party to the agreement, and the parties have no power or authority to enlist the court as their agent.” Instead, whether or not to blue pencil an agreement remains in the trial court’s discretion.
Colorado has not mandated a particular form of blue penciling, and this case did not change that. Despite recognizing a lack of guidance in Colorado law, the appellate court did not address either when or to what extent the trial courts may blue pencil an unenforceable noncompetition or nonsolicitation agreement. Instead, it said that trial judges do not have to if they do not want to, and left the precise contours of permissible judicial modification for another time.
What is clear is that trial courts (and not appellate courts) have the discretion to modify otherwise unenforceable agreements but they cannot be forced to take a broad agreement and rewrite it for the parties. The court made clear that the contracting parties are responsible for writing agreements that do not violate Colorado’s public policies and the statute governing noncompetition and nonsolicitation agreements. In the employment context, that means that restrictive covenants should be narrowly tailored to fit the interest to be protected. Colorado employers wishing to bind their employees after employment would be wise to carefully draft their agreements in the first instance. A judge might modify an overbroad noncompetition or nonsolicitation agreement, but that is not guaranteed, and now it is clear that Colorado parties certainly may not obligate judges to save the day.