Payscale’s legal attempt to enforce a noncompete agreement against a former sales leader has been dismissed by the Delaware Court of Chancery, which deemed the contract overly broad and unenforceable.

The dispute involved Payscale’s former director of sales, who departed the company in December 2023 and joined competitor BetterComp ten months later. Payscale argued that the ex-employee violated an agreement restricting her from working with any competitor for 18 months post-departure. However, the court found the restrictions excessive in both geographic scope and duration.

The agreement attempted to bar the former employee from engaging in competitive work across the U.S. for nearly any company associated with Payscale’s parent company—terms the judge ruled were broader than necessary to protect the company’s legitimate interests.

The ruling pointed out that Payscale had provided only “minimal consideration” in exchange for the noncompete, which further weakened its enforceability. While the defendant had received nontransferable incentives, the court determined their value was insufficient to justify such far-reaching limitations.

Additionally, the judge noted that the former employee did not possess any proprietary knowledge of the parent company’s business, undermining Payscale’s claim that her new role posed a competitive threat.

Importantly, the court declined to revise or “blue pencil” the agreement to make it enforceable, citing the lack of sufficient supporting allegations. Payscale’s related claims of breach of nonsolicitation and confidentiality agreements were also dismissed.

This decision underscores the growing judicial skepticism toward broad noncompete clauses. It follows ongoing national scrutiny, including the Federal Trade Commission’s 2024 proposal to ban noncompetes—a move that, while blocked federally, continues to inspire tighter state-level regulations.

Legal experts suggest that employers looking to protect proprietary interests may instead consider alternatives such as nondisclosure agreements, nonsolicitation clauses, or garden leave arrangements that offer compensation during restrictive periods post-employment.

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Source: Hrdive.com