Third Circuit Confirms Courts’ Authority to Salvage Over Broad Restrictive Covenants

Kevin M. Passerini

On April 26, 2019, the U.S. Court of Appeals for the Third Circuit weighed in on a pair of district court rulings which had denied ADP, LLC’s requests for preliminary injunctive relief against two former employees who ADP alleged had violated post-employment restrictive covenants. In ADP, LLC v. Rafferty, et al., the Court unanimously reversed the rulings and remanded to the district courts with instructions to “blue pencil the agreements and reconsider the four-factor preliminary injunction standard” as it relates to the former employees’ non-competition and customer non-solicitation obligations. The Third Circuit’s opinion restates what has long been the law in New Jersey and clarifies for anyone still in doubt that “New Jersey has evolved from invalidating overbroad restrictive covenants outright to presumptively ‘compress[ing] or reduc[ing]’ their scope ‘so as to render the covenant reasonable’” (alterations in original; citations omitted).

What is “blue penciling”? Continue reading “Third Circuit Confirms Courts’ Authority to Salvage Over Broad Restrictive Covenants”