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Virginia Law on Covenants Not To Compete
Contained in employment contracts, covenants not to compete enable an employer to prevent an employee from working for a competing company after termination. The aim is to prevent that employee from sharing private information about company practices and clientele.
Even without a covenant not to compete, a Virginia employee can commit a number of torts if she shares such private information, including 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, once the employee has already been re-hired by a competitor, can be difficult or well-nigh impossible. Because documents and conversations at the new employers’ can be kept hidden, covenants not to compete, by preventing employment, prevent such communications from occurring at all.
The Virginia Supreme Court provides several factors to be used in determining 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.
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.
Like in Georgia, 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.
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