Will a North Carolina court enforce, or narrow: this non-compete?
A North Carolina court will not rewrite an overbroad covenant: it enforces what the parties wrote or nothing at all, and will cut only along divisions the parties themselves drew. In an employment setting, Whittaker states that covenants not to compete 'are enforceable in this state if they are (1) in writing, (2) made part of a contract of employment, (3) based on valuable consideration, (4) reasonable both as to time and territory, and (5) not against public policy', a test it takes from United Laboratories, Inc. v. Kuykendall. Where the covenant is made in connection with the SALE of a business, Beverage Systems states a different three-part test, adopting the formulation of Jewel Box Stores Corp. v. Morrow: the Court will enforce it '(1) if it is reasonably necessary to protect the legitimate interest of the purchaser; (2) if it is reasonable with respect to both time and territory; and (3) if it does not interfere with the interest of the public.' A statute adds a formal requirement for either kind: N.C.G.S. § 75-4 provides that no contract or agreement limiting the rights of any person to do business anywhere in the State of North Carolina is enforceable unless it is in writing duly signed by the party who agrees not to enter into that business within that territory, and its proviso adds that nothing in the section legalises an agreement that is already illegal or is made illegal by another section of Chapter 75, so satisfying the writing requirement is not the end of the enquiry. On remedy, North Carolina applies the strict blue pencil doctrine: as the Supreme Court restated it in 2026, 'North Carolina courts will only blue-pencil an unreasonable covenant that is "separable" or "divisible" from the reasonable, enforceable covenant', because of the traditional contract rule (Whittaker's own sentence, which the 2026 Court quotes) that 'the courts will not rewrite a contract if it is too broad but will simply not enforce it.' Whittaker is also where the other half of the doctrine can be seen working: 'If the contract is separable, however, and one part is reasonable, the courts will enforce the reasonable provision', and on that ground Whittaker held the customer-solicitation part of an otherwise overbroad paragraph separable and enforceable by an award of damages.
The trap
You cannot buy reformation by contract. In Beverage Systems the agreement expressly authorised a court to rewrite overbroad temporal and territorial limits. The Court opens by saying the trial court declined to enforce the covenant 'even though the parties expressly agreed in their contract that a court could rewrite overbroad temporal and territorial limitations that would otherwise render the covenant unenforceable', and the Supreme Court refused: 'allowing litigants to assign to the court their drafting duties as parties to a contract would put the court in the role of scrivener, making judges postulate new terms that the court hopes the parties would have agreed to be reasonable at the time the covenant was executed or would find reasonable after the court rewrote the limitation. We see nothing but mischief in allowing such a procedure.' So the reformation clause every out-of-state form carries is worse than useless here: it does not save an overbroad territory, and striking the unreasonable territorial divisions can leave no territory in which to enforce the covenant at all. The drafting consequence is the divisibility of the text itself: a covenant's limits cannot be blue-pencilled at all 'unless the Agreement can be interpreted so that it sets out both reasonable and unreasonable restricted territories', so a covenant written as separable territorial or temporal units can lose the bad units and keep the good ones, while one written as a single undivided restraint falls entire. In 2026 the same point defeated a request to delete words in over forty places in one contract: 'The provision sought to be removed must be separable or divisible from the provision sought to be enforced.' On consideration North Carolina is NOT silent, and a drafter should not treat it as an open question: Whittaker holds that 'When the relationship of employer and employee is established before the covenant not to compete is signed there must be consideration for the covenant such as a raise in pay or a new job assignment', it treated a promotion from part-time secretary and part-time salesperson to full-time salesperson with 'a substantial raise in salary' as adequate, and it distinguished the cases relied on against it because in each the employee's job did not change and the promised compensation was 'so illusory' that it was no consideration at all. NOT ESTABLISHED HERE: what duration is reasonable. No authority checked for this answer fixes a reasonable term of months or years for either kind of covenant.
15 authorities
The words that state the rule
This claim brings to the Court a question as to whether damages may be awarded in an action on a covenant not to compete contained in an employment contract. Such covenants are enforceable in this state if they are (1) in writing, (2) made part of a contract of employment, (3) based on valuable consideration, (4) reasonable both as to time and territory, and (5) not against public policy. United Laboratories, Inc. v. Kuykendall, 322 N.C. 643 , 370 S.E. 2d 375 (1988).
The words that state the rule
When the relationship of employer and employee is established before the covenant not to compete is signed there must be consideration for the covenant such as a raise in pay or a new job assignment. Chemical Corp. v. Freeman, 261 N.C. 780 , 136 S.E. 2d 118 (1964); Greene Co. v. Kelley, 261 N.C. 166 , 134 S.E. 2d 166 (1964); Kadis v. Britt, 224 N.C. 154 , 29 S.E. 2d 543 (1944). In this case the plaintiffs evidence showed that prior to 4 March 1976 Connie Daniel had been employed as a part-time secretary and part-time salesperson. On that day she was promoted to full-time salesperson and received a substantial raise in salary. This supports a finding by the jury that the parties entered into a new contract supported by adequate consideration with an ancillary covenant by the employee not to compete. The defendants rely on Collier Cobb and Assoc. v. Leak, 61 N.C. App. 249 , 300 S.E. 2d 583 (1983), disc. rev. denied, 308 N.C. *528 543, 304 S.E. 2d 236 (1983); Mastrom, Inc. v. Warren, 18 N.C. App. 199 , 196 S.E. 2d 528 (1973); and Wilmar, Inc. v. Liles, 13 N.C. App. 71 , 185 S.E. 2d 278 (1971), cert. denied, 280 N.C. 305 , 186 S.E. 2d 178 (1972), to argue that there was no consideration for the covenant in this case. Each of those cases is distinguishable from this case. In each of them the employee had been working for some time before the noncompetition covenant was signed. In none of them was the job of the employee changed at the time the agreement not to compete was signed. In Collier Cobb there was not an increase in compensation and in the other two cases the Court held the promises of additional compensation were so illusory that they were not consideration which would support a promise.
The words that state the rule
If a contract by an employee in restraint of competition is too broad to be a reasonable protection to the employer’s business it will not be enforced. The courts will not rewrite a contract if it is too broad but will simply not enforce it. Paper Co. v. McAllister, 253 N.C. 529 , 117 S.E. 2d 431 ; Noe v. McDevitt, 228 N.C. 242 , 45 S.E. 2d 121 (1947). If the contract is separable, however, and one part is reasonable, the courts will enforce the reasonable provision. Welcome Wagon, Inc. v. Pender, 255 N.C. 244 , 120 S.E. 2d 739 (1961). In this case the plaintiff has not attempted to enforce the provision of the contract which forbids Connie Daniel from engaging in manufacturing. That provision is not before us. We hold that the part which is before us is separable and may be enforced by the award of damages.
- case368 N.C. 693Beverage Systems of the Carolinas, LLC v. Associated Beverage Repair, LLCN.C.decided 2016read it at the source ↗
The words that state the rule
This Court will enforce a covenant not to compete made in connection with the sale of a business “(1) if it is reasonably necessary to protect the legitimate interest of the purchaser; (2) if it is reasonable with respect to both time and territory; and (3) if it does not interfere with the interest of the public.” Jewel Box Stores Corp. v. Morrow, 272 N.C. 659, 662-63, 158 S.E.2d 840, 843 (1968) (citations omitted).
- case368 N.C. 693Beverage Systems of the Carolinas, LLC v. Associated Beverage Repair, LLCN.C.decided 2016read it at the source ↗
The words that state the rule
Allowing litigants to assign to the court their drafting duties as parties to a contract would put the court in the role of scrivener, making judges postulate new terms that the court hopes the parties would have agreed to be reasonable at the time the covenant was executed or would find reasonable after the court rewrote the limitation. We see nothing but mischief in allowing such a procedure.
- case368 N.C. 693Beverage Systems of the Carolinas, LLC v. Associated Beverage Repair, LLCN.C.decided 2016read it at the source ↗
The words that state the rule
The trial court in this case declined to enforce a covenant not to compete, even though the parties expressly agreed in their contract that a court could rewrite overbroad temporal and territorial limitations that would otherwise render the covenant unenforceable.
- case368 N.C. 693Beverage Systems of the Carolinas, LLC v. Associated Beverage Repair, LLCN.C.decided 2016read it at the source ↗
The words that state the rule
The trial court correctly allowed defendants’ motion for summary judgment as to all claims. Accordingly, we reverse the decision of the Court of Appeals. REVERSED.
- caseNo. 68A25 (N.C., filed 22 May 2026)Rel. Ins., Inc. v. Pilot Risk Mgmt. Consulting, LLCN.C.decided 2026
The words that state the rule
To avoid this injustice, North Carolina courts will only blue-pencil an unreasonable covenant that is “separable” or “divisible” from the reasonable, enforceable covenant. Whittaker Gen. Med. Corp., 324 N.C. at 528; Beverage Sys. of the Carolinas, 368 N.C. at 696. Only those separable or divisible covenants may be fairly stricken out.
- caseNo. 68A25 (N.C., filed 22 May 2026)Rel. Ins., Inc. v. Pilot Risk Mgmt. Consulting, LLCN.C.decided 2026
The words that state the rule
North Carolina’s strict application of the doctrine stems from our traditional contract law rule that “[t]he courts will not rewrite a contract if it is too broad but will simply not enforce it.” Whittaker Gen. Med. Corp., 324 N.C. at 528.
- caseNo. 68A25 (N.C., filed 22 May 2026)Rel. Ins., Inc. v. Pilot Risk Mgmt. Consulting, LLCN.C.decided 2026
The words that state the rule
The provision sought to be removed must be separable or divisible from the provision sought to be enforced. Since plaintiffs do not request blue- penciling of a separable, divisible provision from an otherwise enforceable provision, blue-penciling cannot apply. We remand the Non-Solicitation Provisions as they are written.
- statuteN.C.G.S. § 75-4enactment date not established
The words that state the rule
No contract or agreement hereafter made, limiting the rights of any person to do business anywhere in the State of North Carolina shall be enforceable unless such agreement is in writing duly signed by the party who agrees not to enter into any such business within such territory:
- statuteN.C.G.S. § 75-4enactment date not established
The words that state the rule
Provided, nothing herein shall be construed to legalize any contract or agreement not to enter into business in the State of North Carolina, or at any point in the State of North Carolina, which contract is now illegal, or which contract is made illegal by any other section of this Chapter.
- case368 N.C. 693Beverage Systems of the Carolinas, LLC v. Associated Beverage Repair, LLCN.C.decided 2016read it at the source ↗
The words that state the rule
Finally, plaintiff argues that the parties gave the trial court the power under paragraph six of the Agreement to revise its territorial limits to make them reasonable. However, parties cannot contract to give a court power that it does not have.
- case368 N.C. 693Beverage Systems of the Carolinas, LLC v. Associated Beverage Repair, LLCN.C.decided 2016read it at the source ↗
The words that state the rule
The Agreement’s territorial limits cannot be blue-penciled unless the Agreement can be interpreted so that it sets out both reasonable and unreasonable restricted territories. Id. at 248, 120 S.E.2d at 742. We found above that the restrictions to all of North Carolina and South Carolina, the only territorial restrictions in the Agreement, are unreasonable. Striking the unreasonable portions leaves no territory left within which to enforce the covenant not to compete. As a result, blue-penciling cannot save the Agreement.
- case368 N.C. 693Beverage Systems of the Carolinas, LLC v. Associated Beverage Repair, LLCN.C.decided 2016read it at the source ↗
The words that state the rule
As discussed above, blue-penciling is the process by which “a court of equity will take notice of the divisions the parties themselves have made [in a covenant not to compete], and enforce the restrictions in the territorial divisions deemed reasonable and refuse to enforce them in the divisions deemed unreasonable.” Welcome Wagon, 255 N.C. at 248, 120 S.E.2d at 742 (majority opinion).
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.