In
Virginia, it is very difficult to enforce a covenant not to compete against an ex-employee. The Virginia Courts will only enforce a
covenant not to compete if: (a) it is narrowly drawn to protect the employer's
legitimate business interest,
(b) it is not unduly burdensome on the employee's ability to earn a living, and
(c) it is not against public policy. In
each case, the Court will evaluate the covenant not to compete on its own
merits, balancing the terms of the covenant with the circumstances of the
businesses and employees involved.
In
a recent case before the Fairfax County Circuit Court, Daston Corp. v. MiCore Solutions, Inc., et al., the Court declined
to enforce a covenant not to compete which, on its face, appeared to be
reasonable.
In
that case, two employees (with identical employment agreements) of Datson
Corp., a business that develops, markets, sells and manages applications for
Google pursuant to a nationwide license, left their employment and accepted
employment with MiCore Solutions, Inc., a business which provides a range of
consulting and information technology services based on Google
applications.
The
covenant not to compete in each employee’s employment agreement with Datson
read as follows:
“Employee hereby agrees that during the
Employment Period, and for one year following the termination of the Employment
Period, however occurring, Employee will not directly or indirectly, expressly
or tacitly, for himself or on behalf of any Competitor, provide Services to any
Client to which Employee, or any individual working under the supervision of
the Employee, provided substantially similar or related Services during
Employee's employment with Datson.”
The
employment agreement defined “Competitor” as follows: “any firm, person or entity that provides services or products that are
directly competitive with the Services. The “Services” means those Information
Technology, Financial Management, Business Consulting and other services that
are provided by Datson or Employee during the Employment Period or are being
researched or developed by Datson with Employee's assistance as of the
expiration of the Employment Period.”
The
employment agreement further provided that the covenant not to compete was to
be applied nationwide due to the nationwide presence of the Clients, and
contained an acknowledgment on each Employee’s part that the enforcement of the
restrictions would not prevent Employee from being able to fully earn a livelihood. The employment agreement did not define the
word “Client”.
The
Court ruled that the covenant not to compete was overbroad, and therefore
unenforceable, because the phrase “substantially similar or related” is
vague and barred not only direct competition with Daston, but also the provision
of services that are merely “related” to the services provided by Daston. Thus, the covenant not to compete was broader
than necessary to protect Daston’s legitimate business interest. The Court went on to explain that Courts in
Virginia will not “blue pencil” covenants not to compete, meaning that the
Courts will not modify the covenant not to compete so as to be enforceable and
then enforce the modified covenant.
What
this case demonstrates is that in Virginia (and in Fairfax County in
particular), covenants not to compete must be very narrowly tailored to
protect the employer’s interest in order to be enforceable.
Virginia
employers that wish to restrict competition from their employees should have an
attorney artfully draft the non-compete language so as to ensure enforceability. The Virginia Courts have made it clear that
they will not enforce covenants which are overbroad in the slightest
sense. The covenant must narrowly
restrict competition to the specific services that are provided by the employer
and the specific employee. Thus, an
employer cannot rely on the broad boilerplate language found in most standard
form employment agreements. The employer
must carefully tailor the language on an employee by employee basis.
The
attorneys at Gross & Romanick, P.C. have considerable experience drafting
non-compete agreements and handling a variety of employment matters. We know the law, we know the cases, and we
know how to protect your interests.
