A Virginia non-compete agreement is a document that regulates and limits the business activity of an employee after their employment terminates. The agreement’s restrictions routinely prohibit employees from working for (or starting) a competing business in the territories serviced by their former employer. Some agreements include a non-solicitation clause prohibiting communication with the employer’s customers, clients, and current employees. With these restrictions in place, employers are ensured that ex-employees won’t exploit their trade secrets and confidential information to gain a competitive edge in the marketplace.
A non-compete agreement is enforceable if the employer’s restrictions are reasonable. According to Virginia case law, a non-compete is reasonable if the restrictive provisions:
- Go no further than what is required to protect the employer’s “legitimate business interests.”
- Do not limit the employee’s capacity to make a living in an excessively harsh or unfair manner.
- Do not go against public policy.
Virginia courts will further evaluate the reasonableness of a non-compete agreement by considering the duration and geographical restrictions as well as the extent of activity prohibited by the employer.
Non-competes are enforceable when necessary to protect a legitimate business interest. For example, the employer may enforce the agreement to protect proprietary knowledge (e.g., trade secrets, confidential information) or to preserve customer relationships. Virginia courts have also enforced non-competes in connection with a business’s purchase and sale.
- Low-wage employees. A non-compete between an employer and a low-wage employee is unenforceable.
- See § 40.1-28.7:8(A) for a statutory definition of “low-wage employee.”
- Lawyers. A lawyer cannot enforce an agreement against another lawyer if the contract:
- Limits the lawyer’s ability to practice post-termination, except if the agreement is associated with benefits received upon retirement; or
- Imposes competitive restrictions as a condition of settling a client dispute, except in cases where a court or other governing body authorizes the restrictions.
Virginia courts uphold time restrictions that are reasonable, given the circumstances. When looking at the durations enforced in prior cases, a three (3) year restriction imposed on a former sales employee was considered reasonable. Another case involving an insurance company resulted in the enforcement of a five (5) year restriction against one of the company’s partners.
The geographical area where an employee can’t compete with their employer must be reasonable also. Past cases provide examples of what Virginia courts deem equitable. For instance, a salesperson was barred from selling medical supplies in the same territories as their former employee, but could still work in other market areas. The courts also enforced a 60-mile restriction against a radio station employee because it reflected the radius of the station’s signal area.
Employees must receive consideration in exchange for signing a non-compete agreement. Virginia case law indicates that the following forms of consideration are sufficient:
- Continued at-will employment
- Monetary payment
- Signing a non-compete at the offer of employment
- Omniplex World Services v. US Invest. Services, 270 Va. 246, 249, 618 S.E.2d 340, 342 (Va. 2005)
- Simmons v. Miller, 261 Va. 561, 580-82, 544 S.E.2d 666, 678 (Va. 2001)
- Capital One Fin. Corp. v. Kanas, 871 F. Supp. 2d 520, 534 (E.D. Va. 2012)
- Blue Ridge Anesthesia v. Gidick, 239 Va. 369, 389 S.E.2d 467 (Va. 1990)
- Musselman v. the Glass Works, 260 Va. 342, 533 S.E.2d 919 (Va. 2000)
- § 40.1-28.7:8(B)
- Va. R. Sup. Ct. 5.6
- Meissel v. Finley, 198 Va. 577, 581-84, 95 S.E.2d 186, 190-91 (Va. 1956)
- New River Media Group, Inc. v. Knighton, 245 Va. 367, 429 S.E.2d 25 (Va. 1993)
- Alan J. Zuccari, Inc. v. Adams, 1997 WL 1070565, at *3 (Va. Cir. Apr. 10, 1997)
Virginia Non-Disclosure Agreement – Employers use this form to ensure that their confidential information is not disclosed without consent.
Virginia Non-Solicitation Agreement – This document prevents the signee from attempting to recruit their fellow employees or employer’s clients for their business interests.