Non-Compete Agreements: Why Even Unenforceable Agreements Can Be Effective in Virginia
Oftentimes, employees seek a definitive answer to the question:
“Is the non-compete clause in an employment contract enforceable?” The answer to this question, whether yes or no, is almost always qualified with the word “probably”. In Virginia, there is no bright-line rule to establish when a non-compete restriction is enforceable or unenforceable. In each case, the Court will evaluate the restriction on its own merits, taking into consideration the employer’s business interests, the employee’s ability to earn a livelihood and the public policy of Virginia.
Even when a non-compete clause is “probably” unenforceable as written, the employee must understand that the existence of the non-compete clause serves a second purpose, which is to deter another employer from hiring you. In fact, the question “is the agreement enforceable?” can sometimes be irrelevant, as the mere existence of a non-compete clause may be sufficient to deter another employer, who has knowledge of the clause, from hiring the former employee. Employers generally avoid the risk of suit by the former employer, even if succees on the merits is unlikely. Some former employers will file suit as a matter of principle, even if the clause is unlikely to be enforced by the Courts.
The Virginia Supreme Court’s recent decision in Assurance Data, Inc. v. Malyevac, 286 Va. 137 (2013) has given employers added protection. The decision discourages trial courts from dismissing non-compete cases without a full evidentiary hearing. Accordingly, an employer can file suit and prosecute the case to trial even when the non-compete is likely unenforceable based upon prior Virginia case precedent. As a result, the Supreme Court decision has validated an effective strategy for employers who wish to prevent their former employees from obtaining new work. Between the date of filing suit and the date of trial (which can be a year or more in some instances), the employee may be unwilling or unable to secure “competitive” employment.
Employers may accurately conclude from this article that non-compete agreements can be effective even when they are unenforceable as written. However, it is recommended that employers have an experienced attorney artfully draft the non-compete language to ensure enforceability and to discourage employees and other employers from challenging enforceability of the employment agreement.
Employees beware, if you sign a non-compete agreement, expect that it will limit your options after your employment terminates, either directly (by preventing you from seeking competitive employment) or indirectly (by preventing other employers from hiring you).
The attorneys at Gross & Romanick, P.C. have considerable experience drafting and reviewing non-compete agreements, as well as litigating non-compete cases in the Virginia trial courts. If you need a non-competition agreement prepared, enforced or defended, contact the law firm of Gross & Romanick at 703-273-1400. Visit our website at: www.gross.com
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