In a recent case, the Fairfax Circuit Court in Virginia found in favor of the defendant employees, holding that a previous employer’s non-competition and non-solicitation provisions were unenforceable. There, the non-compete and non-solicitation clauses were not limited in scope, but instead prohibited conduct “wholly unrelated” to the employer’s legitimate business needs. Since the court found the restrictive covenants were not narrowly tailored to protect the employer’s legitimate business interests and were against public policy, they were unenforceable.
Metis Group v. Allison
The Metis Group, Inc. (Metis) is a government contractor that received a Blanket Purchase Agreement (BPA) from the U.S. Government for the provision of psychological and related services for the U.S. Army. The BPA also permitted the Army to offer different task orders to different businesses and Metis was awarded several task orders. To service the task orders, Metis entered into Independent Contractor Agreements with defendants Stephanie Allison and David Kohls. The Agreements contained non-compete and non-solicitation clauses.
Under the non-compete provision, Allison and Kohls agreed that during the terms of the Agreements, they would not “solicit, attempt to solicit, engage, contact, provide any professional psychological services” for Metis’ clients. The non-solicitation clause stated that during the Agreement and the following two years, Allison and Kohls must not “induce, or attempt to induce, any employee or contractor to terminate any employment or any contractual relationship” with Metis or any client or “solicit, entice, take away, employ or engage any employee or contractor employed or engaged” by Metis or any client.
In November 2017, Allison and Kohl worked as independent contractors for Metis under task orders that ran for one year and were not renewed, but they did not terminate their Agreements. In June 2019, Metis learned that Allison and Kohl were providing services to the Army under the same BPA with a competitor and filed a complaint alleging breach of contract against Allison and Kohl.
Restraints on trade are disfavored in Virginia and strictly construed. When trying to enforce a restrictive covenant, the employer bears the burden of proving that the restriction (1) is narrowly drawn to protect the employer’s legitimate business interest; (2) is not unduly burdensome on the employee’s ability to earn a living, and (3) is not against public policy. In determining whether the employer has met its burden, courts consider whether the function, geographic scope and duration of the restriction are narrowly drawn to protect the employer’s legitimate interest.
The court determined that the non-compete provision prevents Allison and Kohl from engaging in any professional services with the Army “anywhere in the world and for any purpose, whether or not such purposes compete with The Metis Group’s business model.” If the Army sought the services of Allison and Kohl to start up a completely new project overseas with a different unit, the non-compete would prohibit them from providing those services without Metis even if Metris had never performed work in that specific area. Additionally, the non-solicitation provision prohibited the solicitation of covered employees or contractors even if the reason for causing the employees or contractors to pursue opportunities elsewhere was unrelated to Metis business needs. The court concluded that “the restrictive covenants seek to hoard the services of the defendants and prevent any disruption of the workplace regardless of whether the disruption comes from a competitor.” “Instead of narrowly tailoring the prohibited services,” the court found that Metis “expanded the definition of services it provided by embracing all professional services that can be performed as long as it is the individual defendants who are providing those services. In other words, as long as the doctors were acting within their profession with the entire U.S. Army, they were tied to The Metis Group.” Thus, the provisions were not narrowly drawn to protect the employer’s legitimate business interests.
Next, the court determined that the restrictive covenants violate public policy “because they are designed to perpetuate a monopoly although the work itself performed was limited to a particular government project.” Allison and Kohl were hired for a specific task order, which was completed, and had no more work to complete for Metis. “A contract that prohibits a party from seeking employment at a time the employer had no work for the contractor and did not offer to subsidize the contractor’s livelihood is almost unconscionable.” The court found “no credible evidence as to why The Metis Group needed to create an impermeable barrier preventing others from soliciting their employees or other independent contractors to perform any other work regardless of the nature of the work or location.” Thus, since the court concluded that the restrictive covenants were not narrowly tailored and violated public policy, they were unenforceable.
What Does Metis Group v. Allison Mean for Employers?
Courts determine the enforceability of restrictive covenants on a case-by-case basis, based on what is reasonable and narrowly tailored in light of specific circumstances. Due to the fact intensive inquiry each case requires, the court’s finding in Metis Group v. Allison can’t be interpreted as applicable to all non-competes and non-solicitation provisions across Virginia. However, it may be illustrative of how the court will view such provisions in similar employment scenarios. Specifically, if, as was the case here, a restrictive covenant is drafted so broadly that it prohibits conduct completely unrelated to the type of work the employee was engaged in for the employer, courts may find that the covenant is not sufficiently narrowly tailored to protect the employer’s legitimate business interests. A non-compete that prevents an employee from performing services “anywhere in the world and for any purpose, whether or not such purposes compete with [the employer’s] business model” are likely to be found overly broad and unenforceable.
Ensuring that a non-compete is sufficiently “narrowly tailored” can make or break the agreement’s enforceability. If you need more guidance or information, contact the employment law experts at General Counsel, PC today at 703-991-7973. Our attorneys are experienced in reviewing, drafting, negotiating, and litigating non-compete and non-solicitation agreements for businesses and individuals across Virginia, specifically in Fairfax County, Arlington, Loudoun County, and Prince William.