Virginia Law on Non-Compete Agreements

If you work in the Commonwealth of Virginia and have signed a contract with your employer containing a non-compete clause, you may face legal consequences if you violate that agreement. You should know how this can affect you in the event that you are terminated or decide to switch jobs. The Erlich Law Office can help you evaluate and navigate these situations, whether you work for a defense contractor in Fairfax, a non-profit in Alexandria, or a tech startup in Tyson’s Corner. As discussed below, Virginia has enacted a ban on non-compete agreements for “low-wage employees.” If that applies to you, your non-competition agreement may be invalid.

A non-compete agreement is a contractual promise—or, as it is sometimes called, a restrictive covenant—between two parties, usually employee and employer, governing the behavior of the employee after the end of employment. The purpose of a non-compete agreement is to guarantee the former employee will not engage in certain acts, behaviors, or new employment that competes with the former employer’s business.

Employers often use non-compete agreements to ensure that when they share trade secrets, ideas, and business practices with their employees, partners, and contractors, those individuals won’t leverage that information to start their own business or gain new employment. You may be subject to a non-compete agreement even if you don’t have access to trade secrets.

If you are a worker in Virginia who signed a non-compete agreement (or signed a contract containing a non-compete clause), that isn’t the end of the story. Non-compete agreements still need to pass a test to be valid. In Virginia, non-compete agreements are enforceable if an employer can show:

1. the restriction is “no greater than is necessary to protect the employer’s legitimate business interest”;
2. the agreement is not excessively severe or oppressive in restricting the employee’s ability to find another job or make an income; and
3. the promise does not violate a clear mandate of Virginia public policy.

See Assurance Data, Inc. v. Malyevac , 286 Va. 137, 144 (2013).

To enforce a non-compete agreement in court, the burden is on an employer to show that it is valid. Courts look at a number of factors in assessing the legality of a non-compete clause, including

1. whether the time limitations placed on the worker are reasonable;
2. whether the geographic limitations placed on the worker are reasonable; and
3. whether the scope of the limitation is “greater than is necessary to protect the employer’s legitimate business interest.”

See Modern Environments, Inc. v. Stinnett , 263 Va. 491, 495 (2002).

Generally, when applying this three-prong test, courts are looking at whether an employer is overreaching by using language that is so overbroad or ambiguous that its scope is difficult to determine. Virginia courts are likely to validate a non-complete clause that uses clear and precise language to establish restrictions that are limited to legitimate business needs. Finally, some information is considered so critical that courts will frequently uphold agreements prohibiting their disclosure by former employees, including consumer lists, exact market shares, technological projects, and plans for market expansion.

An employer cannot recover for an employee’s violation of a non-compete clause without establishing proof of harm. Actual (monetary) damage can be shown by referring to instances of “successful competition” – competition from a former employee that results in injury. If an employer has proven a breach of a valid non-compete agreement and demonstrated actual injury, he or she may be able to recover damages as they were set out in the agreement, which often includes liquidated (double) damage provisions.

The reality of the situation, though, is considerably more complicated than it sounds. Even if your employer has made you sign an absurdly overbroad non-compete agreement that a court will surely invalidate, they can still sue you to attempt to enforce it, leaving you forced to litigate the claim. In order to get to the point that a judge or jury says you are out from under the agreement, you may have to spend tens of thousands of dollars on legal fees and costs that you might not be able to recover, should you be able to afford getting that far. In short, even an invalid non-compete agreement can be detrimental to your job prospects and financial health.

If you are employed in Virginia and (1) have signed a non-compete agreement or (2) are considering signing an agreement to not compete, you should have the advice of a qualified attorney. The Erlich Law Office has extensive experience helping clients with employment contracts. As always, please contact one of our attorneys at (703) 791-9087 or email us for a consultation.

Ban on Non-Competition Agreements for Low-Wage Workers

As of July 1, 2020, Virginia prohibits employers from placing non-compete restrictions on their “low-wage employees.” This law only applies to non-compete provisions entered into on or after July 1, 2020.

The Virginia noncompete legislation defines “low-wage employees” as those whose average weekly earnings are less than the average weekly wage of Virginia. “Low-wage employee” includes interns, students, apprentices, or trainees employed, with or without pay, at a trade or occupation to gain work or educational experience. “Low-wage employee” also includes individuals that are independently contracted by a person or company to perform services independent of an employment relationship, and who is compensated for such services by such person or company at an hourly rate that is less than the median hourly wage for Virginia.

As of June 1, 2020, a low-wage employee in Virginia is an individual who earns less than approximately $52,000 per year. The law allows the cutoff for low-wage employee to change based on updated data. If you think this may apply to you, reach out to The Erlich Law Office to schedule a consultation.