N.C. Business Court Reaffirms Strict Limits on Noncompete Agreements
- Joe Dye Culik
- 18 hours ago
- 4 min read
The North Carolina Business Court’s decision in Evergreen Builder Solutions, LLC v. Taylor, 2025 NCBC 77, offers a clear reaffirmation of the State’s longstanding hostility toward overbroad restrictive covenants. The court dismissed breach-of-contract claims based on noncompete and non-solicitation provisions it found unenforceable as a matter of law, while allowing claims tied to confidentiality obligations to proceed. The opinion underscores a recurring theme in North Carolina law: restrictive covenants must be narrowly drafted or they will not be enforced at all.
Noncompetes Under North Carolina Law
North Carolina courts treat covenants not to compete as restraints on trade and “scrutinize [them] strictly.” As the Business Court reiterated, “for a non-competition agreement to be valid and enforceable it must be: (1) in writing; (2) part of an employment contract; (3) based on valuable consideration; (4) reasonable as to time and territory; and (5) designed to protect a legitimate business interest.”
Reasonableness is assessed as a matter of law. Courts balance “the substantial right of the employee to work with that of the employer to protect its legitimate business interests,” keeping in mind that “the ultimate determination depends on whether each restraint is no more restrictive than necessary to protect the legitimate business interests implicated.”
Furthermore, the geographic scope must align with the employer’s actual operations and the employee’s work territory. As the court emphasized, “[a] restriction as to territory is reasonable only to the extent it protects the legitimate interests of the employer in maintaining his customers.” Client-based restrictions are likewise limited; they “cannot extend beyond contacts [the employee] made during the period of the employee’s employment.”
Critically, unlike some states’ courts, North Carolina courts do not rewrite defective covenants. If a restriction is broader than necessary, it is void in its entirety.
The Evergreen Decision
In Evergreen, the plaintiff operated an insulation business primarily in Raleigh and Wilmington. Former employees had signed multiple agreements containing noncompete, non-solicitation, and confidentiality provisions. After those employees joined a competing enterprise, the employer sued for breach of contract, tortious interference, unfair and deceptive trade practices, and related relief.
The Business Court dismissed the breach-of-contract claims premised on the noncompete and non-solicitation provisions. Those provisions restricted competition for at least three years across sweeping geographic areas extending hundreds of miles and spanning multiple states, despite the employer operating in only two North Carolina markets. They also applied to a broad array of services, products, and clients, regardless of whether the employees ever worked with those clients or provided those services.
The court found the provisions unenforceable as a matter of law, concluding that they were “overly and unenforceably broad” because they failed multiple, independent reasonableness constraints that North Carolina law treats as mandatory, not discretionary. As the court reiterated, “[a] restriction as to territory is reasonable only to the extent it protects the legitimate interests of the employer in maintaining his customers.” In particular, the court took issue with restrictions that prohibited competition “directly or indirectly,” a red flag, particularly when it operates to prohibit any involvement in an industry rather than competition for a specific business the employee helped develop
The analysis differed for confidentiality and non-disclosure obligations. The court noted that “[c]ourts do not scrutinize confidentiality clauses as heavily as restrictive covenants.” Although defendants argued that some allegedly confidential information was publicly available, the court held that the employer had adequately pleaded misuse or disclosure of confidential business information at the motion-to-dismiss stage. Specificity was not required, because “[c]laims for breach of contract are not subject to heightened pleading standards.”
Derivative tort claims largely failed. The court reiterated that “establishing a competing business is a legitimate business motive” and cannot, without more, support tortious interference. Claims premised on unenforceable restrictive covenants necessarily collapsed with them.
Practical Implications for Employers
The lesson of Evergreen is straightforward. Overbreadth is fatal. Courts will not narrow an expansive covenant to save it, and employers should expect early dismissal where restrictions exceed the bounds of legitimate protection. In short, employers are only allowed to restrict employees from performing the same job for a direct competitor – beyond that, a noncompete will not be enforced by a North Carolina court.
Geographic restrictions should mirror where the employee actually worked or influenced customers. Non-solicitation provisions should be limited to customers with whom the employee had material contact. Employers should avoid undefined references to “any client,” “any service,” or “direct or indirect” competition.
Confidentiality agreements are not scrutinized by courts to the same degree as noncompetes and nonsolicitation agreements. Confidentiality agreements, therefore, remain a more defensible tool, particularly when supported by consistent internal practices that treat the information as confidential rather than public or generic.
Finally, employers should periodically audit restrictive covenants as roles and markets evolve. Agreements that once may have been defensible can become unenforceable as business realities change.
Conclusion
Evergreen reinforces the Business Court’s insistence that restrictive covenants be precise, restrained, and justified by actual business needs. Employers that rely on broad,
boilerplate noncompetes do so at significant risk. Those that invest in narrowly tailored restrictions and enforceable confidentiality protections are far better positioned to protect their interests under North Carolina law.
Dye Culik is a corporate law firm based in Charlotte, North Carolina, serving clients in NC, SC, MA, and MI. We assist clients with all business matters, including questions on NDAs and noncompetes, and business disputes. Connect with us and mention this article for a complimentary consultation.
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