Covenants Not to Compete
Virginia, like most states, is an “at will” employment state. This means that an employment relationship can be terminated by either party at any time, for any reason, or for no reason at all. Certain employers recognize that these possibilities would allow an employee to begin working for their company, collect valuable proprietary information and trade secrets, establish relationships with clients and customers, and then leave the company, taking the confidential information along. In light of these risks, many employers, therefore, require an employee to sign a noncompetition agreement upon the commencement or completion of employment.
A covenant not to compete – also known as a noncompete clause, noncompete agreement, or a non-competition restriction – is a type of restrictive covenant that prohibits individuals and organizations from engaging in businesses in certain markets and geographical regions for a specific period of time. Its purpose is to prevent a former employee from engaging in unfair competition by improperly using certain information or exploiting certain relationships gained during employment.
An employee receives an insider’s view to the practices and inner workings of the business or organization. As such, employees often become privy to confidential and sensitive matters including client lists and trade secrets. And that information could be valuable when used for the benefit of a competitor.
Though Virginia law recognizes an employer’s interest in protecting its trade secrets and prohibiting the theft or misappropriation of trade secrets, it balances this interest with a person’s right to work and earn a living. To strike this balance, Virginia courts view noncompete covenants as disfavored restraints on trade. Because of this, covenants not to compete must be clear and reasonable, and a noncompete will be deemed valid only if it is “narrowly drawn to protect the employer’s legitimate business interest, is not unduly burdensome on the employee’s ability to earn a living, and is not against public policy.”
Virginia has recognized two general types of legitimate business interests that justify the use of noncompete covenants:
- preventing former employees who had frequent direct customer contact from poaching clients, and
- preventing employees from sharing confidential material, trade secrets, or proprietary information.
When a noncompete agreement merely punishes an employee from leaving the company, it may have difficulty withstanding legal scrutiny. Likewise, a noncompete covenant that continues indefinitely or reaches too broadly will be subject to challenge.
A clear, specific, and properly drafted noncompete clause can foster an employment relationship or ease the stress attendant to the culmination of such relationship. A valid noncompete will alleviate a business’s concern for a potential disaster while still respecting an individual’s right to work.
A noncompete agreement may also be proper when business partners are terminating a relationship, when a company and a consultant or independent contractor are parting ways, or in the sale of a business, where the purchasing party wants to ensure the seller does not compete against the buyer.
Licensed in Virginia, Maryland, New York and the District of Columbia, the non-compete attorneys at MartinWren, P.C. have extensive experience litigating significant and complex non-compete disputes in state courts, appellate courts, and have represented parties in federal courts. MartinWren, P.C.’s Virginia employment attorneys have successfully handled noncompetition disputes arising out of the sale of a $50 million business in the Federal District Court for the Eastern District of Virginia in Richmond and on appeal in the Fourth Circuit Court of Appeals. Our attorneys have also defended a noncompetition breach and business conspiracy case resulting from the purported breach of a $30 million government contract.
The Employment Contracts Attorneys at MartinWren, P.C. are also familiar with drafting, negotiating, and reviewing the various types of clauses, agreements, and covenants arising in the employment context. We have represented employers, executives, and employees about noncompete agreements and offered advice on permissive activities in the face of noncompetes.
For more information about the services MartinWren, P.C.’s Virginia Noncompetition Lawyers and Virginia Employment Contracts Attorneys can offer, please call (434) 817-3100 to speak with Robert E. Byrne, Jr. or John B. Simpson.