Protecting Your Business Part I: Non-Competition Agreements

In order to protect your business, you may want to draft a non-competition agreement or include a covenant not to compete in an employment agreement. Similarly, you may want to hire an individual that is bound by a non-competition agreement. Although Virginia Rule of Professional Conduct 5.6 restricts non-compete agreements related to attorneys, Virginia generally does not have any statutes or regulations governing non-competition agreements. Nevertheless, Virginia courts have provided guidance to employers and employees by ruling on the enforceability of numerous non-competition agreements.

Virginia courts generally disfavor non-competition agreements as restraints on trade. Omniplex World Servs. Corp. v. US Investigations Servs., Inc., 270 Va. 246, 249 (2005) (citations omitted). In Simmons v. Miller, 261 Va. 561, 580-81 (2001), the Virginia Supreme Court held that courts should consider the following factors when determining whether a non-competition agreement is enforceable:

  • Is the restraint, from the standpoint of the employer, reasonable in the sense that it is no greater than necessary to protect the employer in some legitimate business interest?
  • From the standpoint of the employee, is the restraint reasonable in the sense that it is not unduly harsh and oppressive in curtailing his legitimate efforts to earn a livelihood?
  • Is the restraint reasonable from the standpoint of public policy?

Because covenants not to compete are disfavored restraints on trade, ambiguities in them must be “construed in favor of the employee.” Omniplex, 270 Va. at 342. Virginia courts are reluctant to modify or “blue pencil” non-competes to resolve ambiguities or bring them within the scope of reasonableness. In fact, courts that have considered provisions permitting courts to modify covenants not to compete to be discouraged. Further, because a covenant not to compete interferes with an employee’s right to secure employment, the Omniplex court stated that “covenants not to compete have been upheld only where employees are prohibited from competing directly with the former employer or through employment with a direct competitor.” Id.

In order to protect your business, covenants not to compete need to be carefully drafted to ensure that a court will find the covenant not to compete is enforceable. If you are attempting to hire a new employee who signed an agreement containing a covenant not to compete, you need to give careful consideration as to whether you will be permitted to hire the individual or whether a court will enjoin the individual from working for your company.

If you need legal advice on non-competition agreements or any business law issues, Contact Keithley Law, PLLC today by calling (703) 454-5147 and schedule an initial consultation in our Fairfax law office with one of our Virginia attorneys.