Delaware Supreme Court Affirms That Unreasonable Restrictive Covenants Are Not Enforceable, Regardless Of The Remedy Sought

On February 10, 2026, the Delaware Supreme Court, sitting en banc, affirmed a ruling by the Delaware Court of Chancery that restrictive covenants in employment agreements are subject to a reasonableness analysis regardless of whether a plaintiff seeks injunctive relief or monetary damages and granted summary judgment in favor of defendants. Fortiline, Inc. v. McCall, No. 300, 2025, 2026 WL 369934 (Del. Feb. 10, 2026). This decision clarifies an important distinction in Delaware law between restrictive covenants and forfeiture-for-competition provisions, with significant implications for employers seeking to enforce noncompete and non-solicitation agreements.

Plaintiffs brought breach of contract claims against several former employees who had signed agreements containing a confidentiality provision, a non-compete provision, and a non-solicitation provision in exchange for stock options. The Court denied preliminary injunctive relief, ruling that the restrictive covenants were unenforceable because their breadth “was unsupported by the plaintiffs’ legitimate business interests.” Plaintiffs thereafter amended their complaint to seek damages for breach, and defendants moved for summary judgment, arguing that the restrictive covenants had already been found unenforceable. Plaintiffs asserted that in a claim for damages, a restrictive covenant should be treated like a forfeiture-for-competition provision, not subject to a reasonableness review.

Vice Chancellor Morgan T. Zurn disagreed and granted summary judgment on the damages claim for the same reason as injunctive relief—the breadth of the restrictive covenant was unreasonable. The Vice Chancellor emphasized that Delaware law is “contractarian” and that courts must consider contract provisions “for what they are.” Restrictive covenants, unlike forfeiture-for-competition provisions, directly prohibit competitive activity and implicate public policy interests that require judicial scrutiny of their reasonableness, regardless of the type of recovery sought. The Court also rejected plaintiffs’ argument that severing the restrictive covenants would render the stock option grants unsupported by consideration, finding that the stock option grants “served to attract employees to [the company] and to incentivize high performance by allowing the employees to share in the company’s success.” The Delaware Supreme Court affirmed the Court of Chancery’s dismissal of plaintiffs’ claims.

This decision is the second decision in February involving the enforceability of restrictive covenants. A discussion of the first decision, N. Am. Fire Ultimate Holdings, LP v. Doorly, No. 142, 2025, 2026 WL 274647 (Del. Feb. 3, 2026), can be found here.