Virginia Law on Non-Compete Clauses

If you work in the Commonwealth of Virginia and have signed a contract with your employer containing a non-compete clause, you may face legal consequences if you violate that agreement. You should know how this can affect you in the event that you are terminated or decide to switch jobs. The Erlich Law Office can help you evaluate and navigate these situations, whether you work for a defense contractor in Fairfax, a non-profit in Alexandria, or a consultant in Tyson’s Corner.

A non-compete agreement or, as it is sometimes called, a covenant not to compete is an agreement between two parties, usually employee and employer, that the employee will not enter into or start a similar profession or trade in competition with the other party.

Employers often use non-compete clauses to ensure that when they share trade secrets, ideas, and business practices with their employees, partners, and contractors, those individuals won’t simply use the information they learned to start their own businesses, thus becoming the competition.

If you are a worker in Virginia who signed a non-compete clause, that doesn’t necessarily mean that you are bound to abide by it. In Virginia, non-complete clauses are enforceable if an employer can show:

  1. the restriction is “no greater than is necessary to protect the employer’s legitimate business interest”;
  2. the agreement is not excessively severe or oppressive in restricting the employee’s ability to find another job or make an income; and
  3. the promise does not violate a clear mandate of Virginia public policy.

See Paramount Termite Control v. Rector, 238 Va. 171, 174 (1989).

To enforce a non-compete covenant in court, the burden is on an employer to show that it is valid. Courts look at a number of factors in assessing the legality of a non-compete clause, such as whether time or geographic limitations placed on the worker are reasonable or “greater than is necessary to protect the employer’s legitimate business interest.” Generally, when applying the three-prong test, courts are looking at whether an employer is overreaching by using a clause that is so overbroad or ambiguous that its reach is difficult to determine. On the other hand, Virginia courts are likely to validate a non-complete clause that uses clear and precise language to establish restrictions that are limited to legitimate business necessities. Finally, some information is considered so critical that courts will almost always validate agreements prohibiting their disclosure by former employees, including: consumer lists, exact market shares, technological projects, and plans for market expansion.

An employer cannot recover for an employee’s violation of a non-compete clause without establishing proof of harm. Actual (monetary) damage can be shown by referring to instances of “successful competition” – competition from a former employee that results in injury. If an employer has proven a breach of a valid non-compete agreement and demonstrated actual injury, he or she may be able to recover damages as they were set out in the agreement, which often includes liquidated (double) damage provisions.

The reality of the situation, though, is considerably more complicated than it sounds. Even if your employer has made you sign an absurdly overbroad non-compete agreement that a court will surely invalidate, they can still sue you to attempt to enforce it, leaving you forced to litigate the claim. In order to get to the point that a judge or jury says you are out from under the agreement, you may have to spend tens of thousands of dollars on legal fees and costs that you might not be able to recover, should you be able to afford getting that far. In short, even an invalid non-compete agreement can be detrimental to your job prospects and financial health.

If you are employed in Virginia and (1) have signed a non-compete clause or (2) are considering signing an agreement to not compete, you should have the advice of a qualified attorney. The Erlich Law Office has extensive experience helping clients with employment contracts. As always, please contact one of our attorneys at (703) 791-9087 or email us for a free consultation.