How does Nebraska's blue pencil doctrine work for non-competes?

Nebraska courts can strike overbroad provisions from a non-compete and enforce the remaining terms, but they cannot rewrite or add new terms. The agreement must be drafted with divisible clauses for this doctrine to work effectively.

What makes a non-compete enforceable in Nebraska?

Nebraska courts require that the restriction be reasonable in scope and not unduly harsh, that it protect a legitimate business interest like trade secrets or customer relationships, and that it not be injurious to the public.

How long can a non-compete last in Nebraska?

Nebraska courts have upheld non-competes of one to three years. The duration must be proportionate to the competitive interest being protected, and the employer bears the burden of justifying the length.

Non-Compete Clauses in Nebraska: Enforceability Standards

The General Rule in Nebraska

Nebraska enforces non-compete agreements under a reasonableness standard. Nebraska courts have a well-developed body of case law, with key decisions like Polly v. Ray D. Hilderman & Co. and Mertz v. Pharmacists Mutual Insurance Co. establishing the framework.

Nebraska's Three-Part Test

Nebraska courts evaluate non-competes using a three-part test:

Is the restriction reasonable in scope and not unduly harsh or oppressive?
Is the restriction necessary to protect the employer's legitimate business interests?
Is the restriction not injurious to the public?

The employer bears the burden of proving all three elements.

Legitimate Business Interests

Nebraska courts recognize:

Trade secrets and confidential information
Customer relationships and goodwill
Specialized training or knowledge provided by the employer

Importantly, Nebraska courts have held that an employer cannot use a non-compete to prevent competition generally. The restriction must be tied to a specific protectable interest.

Duration and Geographic Reasonableness

Duration: Nebraska courts have upheld non-competes ranging from one to three years. The Nebraska Supreme Court has emphasized that duration must be proportionate to the competitive interest being protected.
Geography: Must be limited to the area where the employee worked or where the employer has competitive interests. Blanket national or worldwide restrictions without justification are disfavored.

The Blue Pencil Doctrine

Nebraska courts apply the blue pencil doctrine, allowing them to strike overbroad provisions and enforce the remainder. However, Nebraska courts will not rewrite the agreement. They can only remove provisions, not add or modify them. This means the non-compete must be drafted with divisible clauses for blue-penciling to work effectively.

Consideration

For new hires, employment is sufficient consideration. Nebraska courts have addressed continued employment for existing employees and have generally required some form of additional consideration, though results vary by circumstance.

Red Flags

Duration exceeding three years
Geographic scope not matching the employee's work area
No identifiable trade secrets or customer relationships
Indivisible restrictions that cannot be blue-penciled
No additional consideration for existing employees

When to Consult a Lawyer

Consider consulting a Nebraska attorney if you are reviewing a non-compete before signing, considering a move to a competitor, or responding to an enforcement demand. Nebraska's blue pencil approach makes the specific drafting of the agreement critical to the outcome.

This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.