Charlene Hassler v. Circle C Resources
2022 WY 28 (2022)
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Rule of Law:
An employment noncompete agreement containing unreasonable restrictions on an employee's ability to work is void as against public policy, and courts will no longer use the 'liberal blue pencil rule' to modify or narrow such an agreement to make it enforceable.
Facts:
- Circle C Resources provided day and residential habilitation services to disabled clients in Natrona and Converse counties, and was authorized to provide services in several other Wyoming counties.
- On March 17, 2015, Circle C hired Charlene Hassler, a CNA, to provide residential habilitation care in her home in Converse County for a long-term adult client.
- At the time of her hire, Ms. Hassler signed Circle C’s “Confidentiality and Noncompetition Agreement,” which prohibited her from engaging in competitive business or providing similar services to former clients for 24 months after employment, in a geographic area including Natrona, Converse, Fremont, Weston, Laramie, Johnson, and Campbell counties.
- The agreement also included a clause stating that if a court found any portion unenforceable, the court-determined maximum reasonable restrictions of time, scope, and geographic area would be substituted.
- Client’s mother, who was her legal guardian, became dissatisfied with Circle C’s day habilitation services and decided to find another provider for Client.
- On January 7, 2017, Client’s case manager notified Circle C that Client was changing providers and Ms. Hassler was leaving Circle C’s employ, but Client remained in Ms. Hassler’s home for residential services, which were billed under a new provider.
- Ms. Hassler stopped providing paid services to Client from August 2017 to August 2018, during which time her husband and daughter cared for Client and were paid through Medicaid.
Procedural Posture:
- Circle C Resources filed a complaint against Charlene Hassler in the District Court of Natrona County (trial court) seeking damages for breach of a noncompete agreement.
- Ms. Hassler answered the complaint, asserting the noncompete agreement was unenforceable and void as against public policy.
- Both parties moved for summary judgment.
- The district court ruled in favor of Circle C, finding the noncompete agreement reasonable and enforceable after narrowing the geographical area to Natrona and Converse counties and changing the duration from 24 to 12 months using the blue pencil rule.
- The district court granted judgment to Circle C for $94,742.10.
- Charlene Hassler (Appellant) appealed the district court's decision to the Supreme Court, State of Wyoming.
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Issue:
Did the district court err by using the liberal blue pencil rule to modify the unreasonable duration and geographical terms in Circle C’s noncompete agreement with Charlene Hassler, rather than declaring the entire agreement void?
Opinions:
Majority - Kautz, Justice
Yes, the district court erred by using the liberal blue pencil rule to modify the unreasonable terms in Circle C’s noncompete agreement with Ms. Hassler; the agreement is instead void as against public policy. The Wyoming Supreme Court overrules its prior adoption of the liberal blue pencil rule established in Hopper v. All Pet Animal Clinic, Inc., concluding that the rule is no longer tenable. The Court found that the liberal blue pencil rule strays from black letter contract interpretation, which prohibits courts from rewriting parties’ poorly drafted contracts or enforcing agreements that violate public policy. The rule also encourages employers with superior bargaining power to draft overly broad, unreasonable trade restraints, secure in the knowledge that a court might later narrow the terms to make them enforceable, effectively giving the employer a “free ride” on an unenforceable provision. This practice places an unfair burden on employees, creates an “in terrorem effect” that discourages employees from seeking better opportunities, and undermines the public policy favoring free competition and employee mobility. Furthermore, it improperly enlists courts to rewrite contracts and creates uncertainty regarding the actual terms of such agreements. The Court determined that the doctrine of stare decisis does not compel adherence to precedent that is unjust, contrary to plain legal principles, or unworkable. Since the original noncompete agreement’s duration and geographical terms were undisputed as unreasonable, and the blue pencil rule is now rejected, the entire agreement is void. The employer, Circle C, failed to prove that all terms of the agreement were reasonable as written.
Analysis:
This case represents a significant shift in Wyoming contract law regarding noncompete agreements, fundamentally altering the landscape for both employers and employees. By overruling Hopper and rejecting the liberal blue pencil rule, the Wyoming Supreme Court emphasizes that employers now bear the full responsibility for drafting noncompete agreements with reasonable, enforceable terms from the outset. This decision is likely to encourage more precise and narrowly tailored restrictive covenants, as employers face the risk of total unenforceability if any term is found unreasonable. It strengthens employee bargaining power and mobility by removing the incentive for employers to impose overly broad restrictions, aligning Wyoming more closely with states that adopt an 'all or nothing' approach to unreasonable restraints on trade.
