Practical Answers to Employment Law Issues
March 31, 2023 - Non-Compete

Trio of Delaware Cases Signal Stricter Review of Sale-of-Business Non-Competes

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On March 16, 2023, the Delaware Chancery Court in Intertek Testing Services NA, Inc. v. Eastman found a sale-of-business non-compete was overbroad, given its worldwide geographic scope, and refused to modify it to make it enforceable. Intertek marks the third time in less than six months that a Delaware state court has refused to enforce or modify a non-compete under the more lenient sale-of-business standard. These cases signal a potential trend of Delaware state courts more closely scrutinizing non-competes under the sale-of-business standard to determine if they go beyond the legitimate business interests of the party seeking enforcement. Where overbreadth is found, these courts appear increasingly hesitant to modify or blue pencil the restrictions to make them enforceable. Companies should be mindful of these cases when drafting and enforcing sale-of-business non-competes governed by Delaware law.

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