An employer must be able to prove the reasonableness of a noncompetition agreement by meeting a specific test of validity in court if the employee challenges it.
Noncompetition agreements are restrictions employers place on employees in their future vocational and commercial endeavors. For example, as a condition of a new job or of continuing employment, an employer may require an employee to sign an agreement with a clause that restricts them if they leave the employer from engaging in competitive work for another employer or in a new business of their own.
Also referred to as noncompetes, anti-competition agreements or covenants not to compete, noncompetition agreements can devastate a person’s ability to use their job experience and skills honed in previous work in a new job or in new business. A person restrained by such a clause should speak with an attorney with specific experience with noncompetes about their options. They may be able to renegotiate the terms of the agreement or get the person released from the contract; otherwise, they could challenge the noncompete in court as unenforceable.
Virginia law looks at noncompetes through a microscope
Virginia courts view noncompetes unfavorably because they restrain trade. If they are ambiguous, the courts view them in a light more favorable to the employee. For a noncompetition agreement or clause to be valid, the employer must prove that:
- The limitations are only as great as required to protect a legitimate business interest.
- The limits imposed are not unnecessarily harsh in restricting the person’s ability to make a living.
- The restrictions are reasonable considering public policy concerns.
In this analysis, the court looks at restrictions on job functions, geographic scope and function. In other words, are the limits placed on what the person may do, on where they may do it and on how long they will be restricted reasonable?
Court finds a noncompete invalid
In NVR, Inc., v. Nelson, the U.S. District Court, Eastern District of Virginia, in interpreting Virginia law struck down a noncompetition agreement because the geographic scope restricted was “indefinite” and “necessarily overbroad.” The noncompete said that the employee could not work in places from which he had received confidential information of the employer.
Because emails with confidential information – or even physical packages – could have come to him from many places across the country where the employer did business, the provision was too overbroad and vague to enforce. The employee could not reasonably be expected to remember where confidential information had been sent from, so he could not comply with the agreement anyway.
The court, therefore, found the noncompete completely invalid. (This case is available on Westlaw at 2017 WL 631684.)
This article introduces a complex topic under Virginia law. Anyone asked to sign a noncompetition agreement or dealing with noncompete restrictions after leaving employment should speak immediately with an experienced employment lawyer for guidance.
The lawyers at Cranwell & Moore P.L.C. in Vinton represent clients in the Roanoke area and throughout Virginia as well as surrounding states in reviewing, negotiating and fighting noncompetition agreements.