Virginia Law on Covenants Not to Compete
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What Is a Covenant Not to Compete in Virginia?
Covenants not to compete are contained in employment contracts, in which they enable an employer to prevent an employee from working for a competing company after termination. The purpose is to prevent former employees from sharing private information about company practices and clientele.
Can an Employee Be Liable even with a Covenant Not to Compete?
Even without a covenant not to compete, a Virginia employee can be liable for a number of torts if she shares private information with a competitor. Causes of action include breach of contract, tortious interference with contract, conversion, business conspiracy, and violation of the Uniform Trade Secrets Act.
However, enforcement and discovery of these violations can be difficult once the employee has been hired by a competitor, Since documents and conversations at the new employers’ can be kept hidden, covenants not to compete are more protective of the former employer’s trade secrets by preventing such communications from occurring at all.
Are Covenants Not to Compete Valid in Virginia?
The Virginia Supreme Court provides several factors to determine whether a covenant not to compete is valid and enforceable. Those factors include:
Is the restraint on the employee greater than is necessary to protect the employer’s legitimate business interests?
- Is the restraint harsh and oppressive on the employee’s ability to earn a living?
- Is the restraint not in accordance with Virginia public policy?
If the answer to any of these questions is "yes," then the covenant not to compete will be rendered unenforceable.
Reasonableness of the Covenant
Virginia covenants not to compete must be reasonable in terms of geographic, temporal, and industrial restrictions. For example, in a recent decision, the Virginia Supreme Court struck down a covenant not to compete that prohibited the employee from selling any kind of motor while the employer sold a certain type of brushless motor. The whole covenant not to compete was thrown out.
In Virginia, covenants not to compete are strictly scrutinized and Courts refuse to "blue-pencil" or modify overly broad language to make them valid. If there is any phrase unfair to the employee, the covenant not to compete is struck down. Therefore, Virginia employers need to carefully draft their covenant not to compete, erring on the side of making it too narrow rather than too expansive.
Consulting an Attorney
Before signing anything that may restrict your future employment access, it is wise to have an attorney review the document. An attorney can also help draft a covenant not to compete, or negotiate the terms of such a covenant.
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Last Modified: 03-26-2014 04:01 PM PDT
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