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Non-Competition Agreement

Courts in Virginia do enforce non-competition agreements if they are narrowly drafted.

Drafting a Non-Competition Agreement

A non-competition agreement is considered a restraint of a trade, so in order to be enforceable it must not be overbroad. The restraint

a) must be no greater than necessary to protect a legitimate business interest,
b) cannot be harsh or oppressive in curtailing the employee’s ability to earn a livelihood, and
c) must be reasonable in light of sound public policy.

I ask business clients to specify the precise work they want to prohibit when an employee leaves. The restriction can be specific to a named customer if the employee interacted with and had information about the customer’s preferences and pricing, or the restriction can state that the employee is prohibited from working in the same industry in the same role that would compete directly with the employer’s product that the employee worked with. Language in the agreement stating “any business similar to the type of business conducted by the company” has been held to be overbroad in Virginia. The geographic scope needs to be limited, also. Any ambiguity will be construed in favor of the employee. The duration of the non-competition provision is generally acceptable at one year but that may vary depending on the industry. Courts in Virginia, unlike some other states, will not rewrite a non-competition agreement to make it enforceable if it is overbroad.

Enforcing a Non-Competition Agreement

An ex-employee’s non-competition agreement may be enforceable by the former employer against both the ex-employee and the business that hired the ex-employee. If the agreement is narrowly drawn and meets the three-part test above, the former employer may sue the former employee to enjoin that employee from working at the new business and may also sue the new business under several theories, including the Virginia Business Conspiracy Act, for damages.

Practice Pointer

I advise employees who have signed a non-competition agreement with their former employer and are now seeking employment elsewhere to bring a copy of the signed agreement to me to review. I will advise the employee as to which new positions may be “off limits” and whether, in my opinion, the agreement is enforceable.

I advise all of my business clients to ask a potential new employee if he or she had signed a non-competition agreement with his or her former employer and, if so, to bring a copy for my review.