Non-compete agreements are frequently drafted by employers to prevent employees from working for a competitor or entering into a competition on their own for a period of time after leaving a job. Non-compete agreements must be:
- narrowly drawn (no greater than necessary) to protect the employer’s legitimate business interest
- reasonable in time, space, and scope
- not unduly harsh or oppressive or burdensome on the employee in curtailing the employee’s ability to earn a livelihood
- not against, and reasonable in light of, sound public policy.
In Virginia, a non-compete agreement can be used to protect trade secrets; confidential information; knowledge of methods of operation; protection from detrimental competition, and customer contacts.
Is a Non-Compete Agreement 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 U.S. Dist. LEXIS 105432 (W.D. 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 1 July 2020, Virginia has prohibited the use of non-compete agreements for low-wage employees. The statute defines the term “low-wage employee.” As of this writing (December 2022), the limit is approximately $52,000. [2]
Reasonable Uses and Objections
When using a non-compete in Virginia, keep in mind the following:
- 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
Virginia Non-Compete Limitations:
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.
Virginia Non-Compete Agreement Sample
This Virginia non-compete agreement template will let you draft an up-to-date agreement for your business clearly, simply, and inexpensively:
