Non-Compete Agreements

VIRGINIA NON-COMPETE LAW: WHAT MAKES AN AGREEMENT ENFORCEABLE?

In Virginia, the enforceability of a non-compete agreement is determined by a three-part test:

1. From the Employer’s Perspective: The restriction must be no broader than necessary to protect the legitimate business interests of the employer. Courts will closely examine whether the restriction is tailored to protect trade secrets, client relationships, or other proprietary information.
2. From the Employee’s Perspective: The restriction must not be overly harsh or oppressive, preventing the employee from earning a livelihood. Courts will consider whether the restriction unreasonably limits the employee’s ability to work in their chosen field.
3. Public Policy: The agreement must be reasonable from a public policy standpoint, ensuring that it does not stifle competition or innovation within the industry (Paramount Termite Control v. Rector, 238 Va. 171, 174 (1989); New River Media Group, Inc. v. Knighton, 245 Va. 367, 369 (1993)).

The burden of proof lies on the employer to show that the non-compete agreement is valid and enforceable. Virginia courts evaluate these factors through the breadth of the activity being restricted, the geographic scope, and the duration of the restriction (Home Paramount Pest Control Cos. v. Shaffer, 282 Va. 412, 415, 718 S.E.2d 762, 764 (2011)).

Duration and Geographic Scope in Non-Compete Agreements

One of the key considerations in determining whether a non-compete agreement is reasonable is the duration of the restriction. Under Virginia law, a durational limit of up to two years is generally considered reasonable, though courts may adjust this depending on the specific circumstances of each case.

Case Law on Duration:

• James Ltd. v. Saks Fifth Ave., Inc. (67 Va. Cir. 126, Arlington 2005): The court upheld a three-year, one-mile non-compete as reasonable, focusing on the geographic scope and the limited nature of the restriction.
• Simmons v. Miller (261 Va. 561, 544 S.E.2d 666, 2001): The Virginia Supreme Court held that a three-year restriction was too lengthy because the agreement did not specify the activities being restricted.

Geographic scope is another critical factor. Virginia courts generally find restrictions enforceable when they are narrowly tailored to cover regions where the employer has legitimate business interests.

Case Law on Geographic Scope:

• In Advanced Marine Enterprises, Inc. v. PRC, Inc. (256 Va. 106, 501 S.E.2d 148, 1998), the Virginia Supreme Court upheld a restriction that prevented the employee from providing competing services within a 50-mile radius of the employer, despite the employer’s national footprint.
• In Tradestaff & Co. v. Lee (City of Norfolk Cir. Ct., 2004), the court upheld a non-compete restricting a former employee from engaging in construction staffing services across several states, as the employer had business interests in those regions.

Restricted Activities: What Can Be Limited?

The type of activities restricted by a non-compete agreement is one of the most critical aspects scrutinized by Virginia courts. In order to be enforceable, the restriction must be closely tied to the activities the employee performed for the employer and not overly broad.

Case Law on Restricted Activities:

• Modern Environments, Inc. v. Stinnett (263 Va. 491, 2002): The Virginia Supreme Court invalidated a non-compete because it did not specify which activities were restricted, making it too broad and vague.
• Roanoke Eng’g Sales Co. v. Rosenbaum (223 Va. 548, 553, 1982): The court upheld a non-compete because it limited the restricted activities to those similar to the employee’s role with the employer.

Notable Case Examples of Virginia Non-Compete Disputes

At Fox & Moghul, we have successfully represented clients on both sides of non-compete disputes in Virginia. Here are a few notable cases that illustrate our expertise in this area:

1. Blue Ridge Anesthesia & Critical Care, Inc. v. Gidick (239 Va. 369, 1990): We successfully defended a medical equipment vendor in a case where the court upheld a three-year non-compete, which limited the former employee from working for competitors providing similar services. Our arguments focused on the tailored nature of the restriction, which allowed the employee to continue working in the medical industry in a non-competitive role.
2. Home Paramount Pest Control Cos. v. Shaffer (282 Va. 412, 2011): Our team successfully argued against an overbroad non-compete in this case, where the court found the restriction to be unenforceable as it barred the employee from any involvement in the pest control industry, even as a passive investor.

Why Choose Fox & Moghul for Non-Compete Litigation?

Non-compete agreements are a vital tool for businesses, but they must be carefully crafted and reasonably limited to be enforceable. At Fox & Moghul, we understand the nuances of Virginia non-compete law and have successfully litigated on behalf of employers and employees alike. Our team ensures that non-compete agreements are compliant with Virginia case law and industry-specific standards.

Contact Us for Expert Non-Compete Counsel

Whether you are drafting a non-compete agreement, defending its enforceability, or seeking to challenge an unreasonable restriction, the experienced attorneys at Fox & Moghul are here to help. Contact us today at 703-652-5506 to schedule a consultation.