CASE REPORT: VIRGINIA COURT FINDS NON-COMPETE UNENFORCEABLE
This report comes to you from the Richmond City Circuit Court in a case styled Leah Pace v. Retirement Plan Administrative Service, Ltd (RPAS) and was decided on September 28, 2007. Pace, a former employee of RPAS filed suit against RPAS asking the court to find the non-compete agreement she signed with RPAS to be invalid and unenforceable.
The court acknowledged a non-compete agreement is enforceable if: (1) it is narrowly drawn to protect the employer’s interest; (2) is not unduly burdensome on the employee’s ability to earn a living; and (3) is not against public policy. The court noted that non-compete agreements are disfavored restraints on trade and the employer has the burden of proving it passes each of the three tests outlined above.
In Pace, the court found that the non-compete agreement was overly broad and therefore unenforceable. Interestingly, the court noted the agreement contained a “blue-pencil” provision which is designed to allow the court the ability to “re-write” the agreement so as to make it comply with Virginia law. The trail judge ruled that Virginia, unlike other states, did not allow for blue-pencil provisions and its inclusion in the agreement made it unenforceable. Finally, the court noted the agreement provided for “liquidated damages” to the employer which is contrary to Virginia’s public policy.
This decision is a win for the good guys!