Employee Non-Compete Agreements in Virginia
- 1 What is an employee noncompete agreement?
- 2 Why are non-compete agreements used?
- 3 What is a reasonable geographic scope in VA non-compete agreements?
- 4 How enforceable are non-compete clauses?
- 5 Employee non-compete law firm
It is illegal for Virginia employers to require a “low-wage employee’ to sign non-compete agreements. As of 2022, a low-wage employee in Virginia is an employee that makes less than $67,080 annually, or $1,290 weekly, according to the Virginia Department of Labor and Industry.
What is an employee noncompete agreement?
A non-compete agreement is a contract between you as the employee and your employer, which prohibits you from leaving your employer and going straight to work for a competitor in a way that harms your former employer.
A non-compete can prohibit you from competing with your former employer, whether it’s by working for a competing business, taking customers, poaching employees, or using confidential information or trade secrets.
In Virginia, non-competes are legally enforceable, as long as they meet these requirements:
- They are not applicable to low-wage employees, defined as making less than $67,080 annually, or $1,290 weekly (updated as of January 2022)
- They are narrowly tailored to protect the employer’s legitimate business interest
- They don’t unreasonably prevent a former employee’s ability to earn a living; and
- They don’t violate Virginia public policy
The second requirement, that a non-compete is narrowly tailored to protect the employer’s legitimate business interest, means that a non-compete cannot be broader than what is necessary to protect your employer’s business.
The legally protectable business interest can be the goodwill that your employer pays you to generate with the employer’s customers, or the confidential business information and trade secrets you have been entrusted with, but this isn’t an exclusive list of examples.
The third requirement, that it doesn’t unreasonably prevent you from earning a living, can apply to how broad a non-compete is, or the length of time it lasts.
Below are some factors that Virginia Courts analyze in determining whether a non-compete is enforceable:
Geographic limitations: A non-compete that covers all of the United States when a company just operates in one state is geographically overbroad, and likely unenforceable. Virginia employers should only have a non-compete that covers their actual business territories.
Duties Scope: The non-compete should only apply if you take a similar or identical position with a competitor.
A non-compete provision that just generally restricts you from working for any competitor of your former employer in any job is also overbroad, because it doesn’t specify what job you would be doing, and it unreasonably prevents you from earning a living.
Time limitations: Virginia courts have upheld employment noncompete agreements for up to 2 years post-employment. Based on our law firm’s review of hundreds of non-competes, most Virginia employers have 12-month non-competes. If a non-compete is included in a business sale, it can be enforceable for a longer period, up to 5 years.
In some states, a Court can “blue pencil,” or edit an unenforceable non-compete clause to make it enforceable. But Virginia law does not allow blue-penciling, and so Virginia employers will want to make sure their non-compete agreements are written in a narrow fashion only to protect their legitimate business interests, and not so broad that it would prevent their former employees from making a living after they leave.
Why are non-compete agreements used?
Non-competes are used to prevent an unfair competitive advantage, usually when an employee has access to confidential business information, trade secrets, or specialized business methods. The non-compete gives the employer legal protection if an employee uses or discloses this confidential information elsewhere, like with a competitor or in a new business.
If an employee goes to work for a competitor right after leaving their former employer and is subject to a non-compete, they may be limited in what type of job they do, where they work, or what kind of information they disclose.
Likewise, if any employee starts their own business after leaving their former employer, the non-compete can restrict where the business operates, what customers they serve, and what information they can use to run the business.
A non-compete is generally used in competitive industries where an employee’s departure to work for a competitor or start their own business could significantly harm their former employer.
Can I work for a competitor if I signed a non-compete?
In Virginia, a non-compete cannot ban you from working for a competitor in any position.
A non-compete that completely prohibits you from working for a competitor is overbroad and will likely be held enforceable by a Virginia court. However, if the non-compete is narrowly tailored and serves only to protect your former employer’s legitimate business interest, it will likely be held enforceable.
A non-compete that prevents you from servicing your former employer’s clients for 12 months after your termination and prohibits you from poaching former employees for 12 months after your termination will likely be enforceable in Virginia.
A non-compete that prohibits you from working for a competitor in any role whatsoever violates the “janitor rule,” which means you couldn’t even work as a janitor for a competitor without violating the non-compete, meaning the non-compete is overbroad and thus unenforceable in Virginia.
What is the standard length of a non-compete agreement?
Usually, any employment non-compete over 2 years will be held unenforceable in Virginia.
Employment non-competes in Virginia should not exceed 2 years, and non-competes for business sales should not exceed 5 years. The standard length of a non-compete is 12 months.
Based on our law firm’s review of hundreds of employment non-competes, most Virginia employers have 12-month non-competes. We do occasionally see 6-month non-competes and 18-month non-competes, but it is very rare to see 2-year non-competes.
If a non-compete is created pursuant to the sale of a business, it can go up to 5 years in Virginia and still be enforceable.
What is a reasonable geographic scope in VA non-compete agreements?
If the geographic scope is narrowly drawn to only cover where the employee was generating goodwill for the employer, it is likely reasonable under Virginia law.
So, for example, if a salesperson was servicing clients in one county in Virginia, the non-compete’s geographic scope should only apply to that particular territory, and not every territory where the employer was conducting business. The legally protectable business interest is the business goodwill the employee generated for the employer with its clients.
A reasonable geographic scope for a non-compete will depend on where an employer operates, where its clients are located, and its industry. Radius restrictions in non-competes are common for sales representatives covering specific territories, and also medical practices.
Remote work can make non-competes more difficult to interpret, particularly if an employee working from one place, and clients are located in other areas. In this instance, it may be more beneficial for a non-compete to cover clients and accounts, as opposed to just a geographic scope or mile radius.
How enforceable are non-compete clauses?
Non-competes are legally enforceable in Virginia, provided they are: 1) narrowly tailored to protect the employer’s legitimate business interest, 2) don’t unreasonably prevent a former employee’s ability to earn a living, and 3) are not against Virginia public policy.
Omniplex World Servs. Corp. v. US Investigations Servs., 270 Va. 246, 249 (2005). If the non-compete cannot meet this 3-part test, a Court will find it to be legally unenforceable.
Additionally, non-compete clauses are not enforceable for lower-wage employees making less than $67,080 a year, or $1,290 weekly wage.
If a non-compete clause is overbroad and fails the 3-part test noted above, a Virginia court will refuse to enforce the clause. In some states, a court will “blue pencil” the clause to make it enforceable, by editing the clause to make it narrower, but Virginia courts do not blue pencil, and the entire clause will be deemed unenforceable.
Employee non-compete law firm
Because non-competes can significantly impact your future job prospects, it’s important to consult with an employment attorney before you sign one. Also, if you are considering starting your own business or going to work for a competitor company, consulting with an employment attorney about your non-compete will help you understand whether it’s legally enforceable.
The Lipp Law Firm is experienced in reviewing non-competes from all types of industries and can quickly and economically review your employment agreement to give you powerful information to help inform your career decisions. Contact our non-compete agreement attorneys today to schedule a legal consultation so you can understand how your employment contract can impact your next steps.
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