Non-Competition Agreements (aka "Noncompetes")
A Non-Competition Agreement or “Noncompete” is a written contract whereby an employee promises to limit future employment opportunities in consideration for ongoing employment with a current employer. A Non-Solicitation Agreement is a similar agreement whereby an employee promises to restrict contacts with a business' clients following the separation of employment.
From an employer’s perspective, a Noncompete is a valuable tool to protect their client base, trade secrets, and other confidential business information. From the employee’s perspective, a Noncompete can represent a burdensome restraint on one's ability to find new employment following a termination or separation. Noncompetes commonly are paired with Confidentiality Agreements, which limit the use or disclosure of proprietary information or trade secrets.
Beginning July 2020, Virginia law bans new non-competition agreements against "lower wage" employees. See Va Code Section 40.1-28.7:8 Older agreements remain enforcable. The statute provides that no employer shall enter into, enforce, or threaten to enforce a covenant not to compete with any low-wage employee. and provides a private cause of action for violations. The annual threshold for "Low Wage" employesis is set by the Commonwealth. For 2023, it will be set at $1,273 per week or approximately $66,196 per year. However, the law excludes employees whose earnings are derived primariy from sales commissions, incentives, or bonuses paid to the employee by the employer.
If not otherwise prohibited by statute, a valid Noncompete or Non-Solicitation Agreement may be enforced in Court, resulting in monetary damages and an injunction prohibiting employment with a covered competitor. However, enforcement is not always a simple task. The employer bears the burden of showing that the restraint is reasonable and no greater than necessary to protect the employer's legitimate business interests. The restraint may not be unduly harsh or oppressive in curtailing the employee's legitimate efforts to earn a livelihood and must be reasonable in light of public policy. Generally, Courts evaluate Noncompetes and Non-Solicitation Agreements according to the following criteria:
(1) Is the restraint, from the standpoint of the employer, reasonable in the sense that it is no greater than is necessary to protect the employer's legitimate business interest?
(2) From the standpoint of the employee, is the restraint reasonable in the sense that it is not unduly harsh and oppressive in curtailing his legitimate efforts to earn a livelihood?
(3) Is the restraint reasonable as a matter of public policy?
The actual application of these criteria can be somewhat complex. Reasonableness is evaluated in terms of the duration, geography and the scope of the restraint. If you have a Noncompete or Non-Solicitation Agreement and are concerned that your prospective employment may be in conflict with the terms of that agreement, you should consult immediately with an experienced employment attorney before commencing your new employment.