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Non-Competes – Enforceable in Virginia? – Part 2

The November edition of this newsletter discussed the three-prong test adopted by Virginia courts when reviewing the enforceability of non-compete agreements. To recap, Virginia courts do not enforce non-compete restraints that are: (1) greater than necessary to protect the employer in some legitimate business interest, (2) unduly harsh and oppressive in curtailing the former employee’s legitimate efforts to earn a livelihood, or (3) contrary to sound public policy. This article will continue the discussion to provide the reader with a more in-depth understanding of the court’s analysis.

The focus of the court’s review generally involves whether the restrictions are reasonable with regard to geographic area, scope of work, and duration. These factors are considered together and not as three separate and distinct issues. The “scope of work” component usually receives the most focus from the court. In most cases, the non-compete will be enforced only if it restricts the former employee from providing the specific services that were provided to the former employer, and not from merely providing services for a competitor. Virginia lawyers often apply the “janitor test” when assessing the scope of work component. If the former employee would be prevented from working as a janitor for a competitor, the restraint is probably too broad (assuming, of course, that the employee was not employed as a janitor!).

The geographic area component is also a common focus of the court, as the court will not enforce a restraint that prevents the employee from working in a location that the former employer does not do business in. However, in today’s e-commerce business environment, many employers can make the credible argument that the non-compete should be enforceable on a nationwide basis. Duration is perhaps the most clear-cut component of the group, as Virginia courts very rarely enforce non-compete agreements that exceed two (2) years in duration. However, in certain circumstances, including business sales and partnership agreements, the courts will give deference to the restraint with respect to geographic area and duration since the parties are of a more equal bargaining power when they execute the non-compete agreement.

As such, non-compete agreements must be carefully drafted and limited in scope in order to be enforceable in Virginia. In all cases, the employer bears the burden of proof that the agreement as written is enforceable. The court will not change (“blue-pencil”) the written terms to clarify the meaning, to conform it to the law, or to reflect the intent of the parties. Recent Virginia court decisions have followed a national trend of tightening the standards of enforceability so as not to restrain trade and employment. However, as stated in our November article, a Virginia court will not summarily rule on a non-compete agreement without providing the employer an evidentiary hearing to articulate why the agreement should be enforced. Thus, even when a non-compete agreement is unenforceable on its face, the employee can be put in the very tough position of having to choose between (a) complying with the overbroad restriction or (b) incurring a large legal bill fighting the employer. In addition, prospective employers may be reluctant to hire an individual that is subject to a non-compete, regardless of the merits of the non-compete, since the new employer could also be named in a lawsuit filed by the former employer.

 

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We Can Help

The attorneys of Gross & Romanick, P.C. have a great deal of experience drafting non-compete agreements and litigating non-compete cases. In addition, our attorneys regularly review existing non-compete agreements for individuals and businesses to analyze the probable outcome of litigation to enforce the same.

Please consider our law firm for all of your business legal needs, including registered agent services, litigation, contract review, buying and selling businesses, business start-up and formation, commercial leases, evictions, employment matters, and debt collection. Go to www.gross.com to learn more about us. Call us at 703-273-1400 or send an e-mail to law@gross.com.

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Gross & Romanick, P.C. is a law firm located in Fairfax, Virginia. Since 1980, our attorneys have dedicated themselves to providing cost efficient legal services to individuals and businesses in Northern Virginia and the Washington, D.C. Metro Area. We meet our clients’ needs by applying hard work with integrity to find creative and practical legal solutions. Our extensive business litigation experience, and our understanding of the transactional mistakes that often lead to expensive courtroom battles, helps us to advise our clients on business deals and the resolution of commercial disputes. To learn more about our firm, visit: www.gross.com or call us at 703-273-1400