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Restrictive Covenants in Virginia Employment Contracts

November 24, 2014 in Articles | MARTIN WREN, P.C. | LEAVE A COMMENT

Restrictive Covenants in Virginia Employment Contracts

Virginia is an at-will employment state, meaning that either an employee or the employer can terminate the employment relationship at any time, for any reason, or for no reason at all.[i]  Except in certain circumstances, any duties and obligations an employee has to an employer—and vice versa—end when the employment relationship ends.  For a variety of reasons, many employees and employers alter the nature of their post-employment relationship by entering agreements that contain restrictive covenants.

Virginia Lawyer Robert Byrne

Virginia Lawyer Robert Byrne

The most common and easily recognizable restrictive covenant in the employment context is a noncompetition agreement, or a noncompete.[ii]  Many individuals are not aware that there are a number of other restrictive covenants that may exist in addition to a noncompete agreement, such as nonsolicitation of employee provisions, confidentiality covenants, nondisclosure provisions, or nonpiracy provisions.  Employees who are not aware of these provisions may be surprised to learn that they oftentimes impose significant restrictions on post-employment conduct.

With this in mind, here’s a brief discussion of each of these types of restrictive covenants that commonly arise in employment contracts.

Nonsolicitation of employee provision.  A nonsolicitation provision forbids former workers from “raiding” their former team members, staff members, or other personnel.  Such nonsolicitation provisions prevent a “brain drain” that could occur if a key employee left the business.  These provisions can be valid in Virginia so long as they are reasonable in scope.

Confidentiality covenants.  Our service-based society often operates based on trade secrets and other intellectual property.  Certain employees with access to this sensitive information, typically inventors, executives, engineers, technicians, programmers, and others that work with secret information, are often required to sign agreements with confidentiality provisions.

Nondisclosure provisions.  Nondisclosure agreements, or NDAs, are agreements that protect the confidentiality of information that is presented to another for a limited purpose.  NDAs serve several of the same purposes of confidentiality agreements, but these are nevertheless often included in agreements with confidentiality covenants.

Nonpiracy provisions.  In addition to noncompete agreements, many employers have provisions that forbid former employees from contacting or soliciting their former customers, clients, or business contacts, or from doing any business with them.  In many respects, these nonpiracy provisions can be even more far reaching than covenants not to compete.  This is because nonpiracy provisions may not be limited by function or industry in the same way that a non-compete provision would be.

Covenants Not to Compete.  Last but not least, Virginia law permits employers to restrict an individual’s post-employment activities by having them enter a noncompete agreement.  Covenants not to compete are disfavored under Virginia law, which means that courts may refuse to enforce a provision that it determines is broader than necessary to protect an employer’s legitimate business interest.

Most of these provisions are, in at least some sense, disfavored under Virginia law as unreasonable restraints on trade.  If you are an employer or employee seeking to enforce or defeat a restrictive covenant through litigation, it is important for you to confer with an attorney who is experienced with drafting and litigating matters involving noncompetes and other restrictive covenants.

Restrictive covenants are important for employers and employees alike.  Employees need to be mindful of restrictive covenants for assessing their post-employment options and when negotiating a severance agreement.  At the same time, business owners want to ensure they adequately protect their intellectual property by wisely using restrictive covenants.

For more information about restrictive covenants under Virginia law, contact Charlottesville Employment Lawyer Robert E. Byrne, Jr. of MartinWren, P.C. at (434) 817-3100 or by email at byrne@martinwrenlaw.com.

This post is for informational purposes only and is not legal advice.

[i] There are some exceptions to this rule, of course, such as when an employer terminates an employee for discriminatory reasons on the basis of race, ethnicity, disability, religion, or some other protected class.

[ii] See my article, “A Review of Noncompete Agreements in Virginia” for more information.  http://www.martinwrenlaw.com/a-review-of-noncompetition-covenants-in-virginia/

 

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