Enforceability of Non-Competition Agreements in Virginia

In general, non-competition agreements will be strictly construed against employers. These agreements must be as narrowly drafted as possible to protect the vital interests of the employer. If the agreement is too broad or vague, it is unlikely that a court will enforce the agreement.

When enforceability is challenged, Courts in Virginia will review the non-competition agreement from three different perspectives:

  1. From the standpoint of the employer, is the restraint reasonable?  Meaning, is the restraint no greater than necessary to protect the employer in some legitimate business interest?
  2. From the standpoint of the employee, is the restraint reasonable in the sense that it is not unduly harsh and oppressive in curtailing the employee’s legitimate efforts to earn a livelihood?
  3. From the standpoint of sound public policy, is the restraint reasonable?

Courts will also review terms such as geographical limitation, time limitation, and scope of the limitation to determine reasonableness, and therefore enforceability.  With so many variables in the mix, it’s no wonder many employers are unable to walk the fine line between enforceability and non-enforceability.

Non-Competes are Prohibited for Low-Wage Workers

As of July 1, 2020, Virginia employers are prohibited from entering into, enforcing, or threatening to enforce non-compete agreements with “low-wage” employees. Under Senate Bill 480, a “low-wage employee” is a worker whose average weekly earnings during the preceding 52 weeks “are less than the average weekly wage of the Commonwealth” pursuant to VA Code § 65.2-500. This includes interns, students, apprentices, or trainees employed, with or without pay. Low-wage employee also includes independent contractors paid an hourly rate less than the median hourly wage for the Commonwealth. The Bill applies to applicable non-competes entered into on or after July 1, 2020.

The prohibition applies to agreements, including a provision of an employment contract, that restrains, prohibits, or otherwise restricts an individual's ability to compete with a former employer. The Bill states that a "covenant not to compete shall not restrict an employee from providing a service to a customer or client of the employer if the employee does not initiate contact with or solicit the customer or client.” While the Bill does not expressly address non-solicitation agreements, the Bill does seem to limit the enforceability of these agreements. Under the Bill, agreements can’t restrict employees from providing services to customers the employee did not solicit or initiate contact with, which seems to imply that agreements can prevent employees from soliciting clients of the former employer. Additionally, employers can still utilize non-disclosure and confidentiality agreements with low wage employees, to protect the employer’s trade secrets and proprietary information.

The case of Edward Jones’ $42 million in lost assets resulting from former employee Samuel Clyburn’s solicitation, showcases the serious consequences that can result for an employer if an employee breaches a non-solicitation agreement, or if a non-solicitation agreement is found to be unenforceable. Employers, particularly those in the financial sector, may wish to consider having their employment agreements reviewed to ensure the enforceability of similar non-solicitation provisions.

Our attorneys at General Counsel, P.C. have experience in walking the fine line of protecting a wide range of employer interests, while still remaining narrow enough to be enforceable.

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