A Virginia Non-Compete Agreement is a legally binding contract between an employer and an employee that restricts the employee’s ability to work for a competitor or start a competing business for a certain period after leaving the employer.
To be valid, the agreement must be narrowly focused on protecting the employer’s legitimate business interests, reasonable in terms of time, scope, and geography, and not overly harsh or oppressive to the employee’s ability to earn a living.
The agreement can safeguard trade secrets, confidential information, knowledge of business methods, protection from harmful competition, and customer contacts.
Reasonable Uses and Objections
- Enforceable when terminated without cause? – Yes.
- Employee non-solicitation agreement permitted? – Yes.
- Customer non-solicitation agreements permitted? – Yes.
- Does continuing employment equal sufficient consideration? – Yes.
- Statute of Limitations for breach of contract: 5 years.
Legally Enforceable in Virginia?
Virginia courts set forth the rules for enforcing a non-compete agreement. An employer seeking to enforce a non-compete agreement must show that the agreement meets three tests:
- The agreement must be no greater than necessary to protect a legitimate business interest;
- The agreement must not be unduly harsh or oppressive in curtailing the employee’s ability to earn a living;
- The agreement must be reasonable in light of sound public policy.
This rule was recently re-articulated in Gordon v. Blue Mt. Therapy, 2021 US Dist. LEXIS 105432 (WD Va. June 4, 2021)
In determining whether the test elements are met, the court will evaluate the duration and geographic limitations of the non-compete agreement and the function and purpose of the non-compete agreement.
In drafting a non-compete agreement, employers should bear in mind that the burden is upon them to prove the terms are reasonable if the matter should ever go to court. The Virginia Supreme Court has ruled that “covenants in restraint of trade are not favored, will be strictly construed, and in the event of ambiguity will be construed in favor of the employee.” [1]
Agreements that are too vague, too broad, or too limiting in the ability of the employee to earn a living are likely to be invalidated. Agreements that are precise in their terms, careful in defining the geographical area in which the employee is restricted, and reasonable and moderate in their terms are more likely to find favor in a court.
As of July 1, 2020, Virginia has prohibited the use of non-compete agreements for low-wage employees. VA Code § 40.1-28.7:8 defines the term “low-wage employee.” As of this writing (December 2022), the limit is approximately $52,000.
Time Limitations
Virginia courts routinely scrutinize agreements to ensure they are reasonable as to time.
Geographical Limitations
Geographical restrictions on an employee in a non-compete agreement must be reasonable as to space.
Sample
Below, download a Virginia non-compete agreement template in PDF or Word format:
