Virginia Independent Contractor Non-Competition Agreements
Under Virginia law, a non-competition agreement will be strictly construed against employers and will be found to be enforceable if the agreement as a whole is found to be reasonable. Courts require non-competition agreements to be as narrowly tailored as possible to protect the vital interests of the employer while still leaving opportunity for a former employee to pursue a career. A non-competition agreement will be enforced if (1) the covenant is narrowly tailored to protect the employer’s legitimate business interest, (2) the covenant is not unduly burdensome on the employee’s ability to earn a living, and (3) the covenant is reasonable from a public policy standpoint. The employer bears the burden of proving these factors. In determining whether an employer has met its burden of proving these factors, the court looks at the function of the restriction, the geographical scope of the restriction, and the duration of the restraint. The court analyzes these aspects together, rather than as separate inquiries. Although non-competition agreements are enforceable in Virginia, they are considered disfavored restraints on trade. Due to this, the employer bears the burden of proving any ambiguities in the agreement. Further, courts will construe any ambiguities in the agreement in the employee’s favor. If a provision in a non-competition agreement is capable of more than one reasonable interpretation, a court will find it to be ambiguous. If a provision is unambiguous, it is read according to its plain meaning.
Virginia courts have determined that non-competition agreements that are overly broad pertaining to the types of activities prohibited are unenforceable. Overly broad provisions are not effective in protecting an employer’s business interests because they encompass more aspects than necessary to protect that interest. “Covenants that are ambiguous, that prevent an employee from doing work unrelated to the work that they previously did for the employer, or that go beyond the employer’s legitimate interest are unenforceable.” Each non-competition agreement must be evaluated on its own merits, considering the particular circumstance of the individual case.
In Virginia, the law of non-competition agreements pertaining to independent contractors is vague due to the nature of an independent contractor’s business. An independent contractor offers its services broadly in an industry and is supposed to work for various entities within that industry.
In Preferred Sys. Solutions, Inc., PSS, a government contractor sued subcontractor GP following GP’s termination of contract and subsequent contract with Accenture for breach of contract and misappropriation of trade secrets. PSS hired subcontractor GP to assist in systems solutions work that it was performing. The agreement included a non-competition clause that stated for a period of twelve months GP agrees not to directly or indirectly enter into contract as a subcontractor with Accenture to provide similar support that PSS provides to Accenture or enter into an agreement with a competing business and provide them with similar support that PSS provides to Accenture. After GP submitted its two weeks’ notice it terminated its subcontract with PSS and began working for Accenture. GP argued that the non-competition clause was overbroad because it prohibited indirect competition. The court determined that the non-competition clause was enforceable even though it lacked a geographic restriction because it was narrowly tailored to encompass only the companies in direct competition with PSS. The court affirmed the circuit court’s determination that GP breached the subcontract when it entered into a contract with Accenture.
Preferred Sys. Solutions shows that although an independent contractor offers its services broadly to an industry, a court will enforce a non-competition agreement that is narrowly tailored to prevent the contractor from offering similar services to specific competitors. It would, however, be unlikely that a court would enforce a restriction with an employer’s indirect competitors because this would unreasonably burden the independent contractor’s ability to serve its industry and earn a living.