Non-compete Agreements in Virginia
The enforceability of a non-compete agreement in Virginia depends greatly on the specific terms of the agreement. Many times, clients will come to me and ask for a clear determination of whether a non-compete agreement will be upheld. The problem is that there is no clear rule and the Virginia courts will look to many factors when determining whether to enforce a non-compete agreement.
Virginia courts favor competition.
For starters, Virginia courts tend to favor fair competition. After all, competition is good for our economy and consumers. In accordance with this democratic value, a non-compete agreement must be reasonable. The scope of the non-compete should narrowly protect the legitimate business interests of the company without infringing on the employee’s ability to earn a living. After all, it is not in the public interest to have high unemployment.
Does the business have a legitimate business interest?
First, let’s review possible elements of a non-compete agreement. The agreement is designed to protect the legitimate business interests of the company to keep the marketplace fair and balanced. However, each industry has unique interests; so, the company must tailor the agreement to its specific needs. The court will also consider whether it is truly a legitimate business interest. Simply harassing former employees or attempting to block all competition are not legitimate business interests. The interest must not be contrary to public policy.
Three categories of restrictions in employment agreements.
Generally, there are three categories of restrictions: confidentiality (proprietary company information), non-solicitation (customers and employees), and traditional competitor employment. An agreement may include any or all of these restrictions, but not every business needs to include each element listed above. For example, a restaurant may require a cook to sign a confidentiality and/or non-solicitation non-compete agreement to protect a special sauce and prevent the employee from absconding with the recipe and fellow employees to start their own venture based on the proprietary blend of ingredients. In the restaurant industry, however, employees often work for multiple establishments at the same time to make ends meet. A restriction on employment with competitors may be viewed by a Virginia court as an unnecessary burden on the employee’s ability to earn a living.
Is the non-compete agreement limited in scope?
Usually, there are two restrictions applied to the above-mentioned elements: time and territory. In Virginia, courts do not like to leave restrictions open-ended. So an agreement requiring a commitment for the rest of an individual’s life would almost certainly not be enforceable, but committing to a period of 6 months to 2 years has been found to be reasonable. Likewise, territory must be clearly defined. It is unreasonable to expect an individual to uproot his/her life completely to move entirely out of the restricted area to find work. Again, the court takes industry specific requirements into account. For example: it may be reasonable to expect an international sales person to restrict his/her activities from a specific region, but it would not be reasonable to say that he/she cannot sell anywhere in the world. In addition, the court will want to consider whether the non-compete agreement is merely an attempt to form a regional monopoly by forcing all competition out of that specific area of Virginia. If so, it will be closely scrutinized by the court.
Non-compete agreements must be clearly written and defined to be enforceable in Virginia.
The probable enforceability of restrictions in a non-compete agreement in Virginia, is directly related to the care and consideration given to composing the agreement. These types of agreements will be scrutinized and any ambiguity will work against enforceability. If you are a business preparing to write a non-compete agreement, it is in your best interest to consult an experienced attorney to help you protect your interests with an enforceable contract. Or, perhaps you have a written agreement that you believe your former employee has violated. Likewise, it is also important, if you are an employee, to contact an attorney before signing an agreement that restricts your right to earn a living. Please call our office if you need advice before signing or proceeding in a dispute related to a non-compete agreement.
Non-Compete Agreement | Ryan C. Young | Richmond, Virginia Contract Attorney