Non-Competes in the world of Coronavirus
These are troubling times. Every person and every business in America will be affected. Retailers, restaurants, bars, movie theaters, etc., will be firing, furloughing, and/or laying off hundreds of thousand employees…many of whom have employment contracts which prevent them from working for a competitor.
Virginia courts will enforce reasonable non-compete and non-solicitation contracts and they use a “3 prong test” to evaluate just how reasonable those restrictions are. First, the court will look to see if the restriction is broader (read more restrictive) than is necessary to protect a reasonable business interest of the employer. Second, the court will look to see if the restriction unfairly prevents the employee from earning a livelihood and feeding his/her family. Typically, a court’s decision to enforce is decided by the available evidence on these two prongs.
However, I did say Virginia courts use a “3 prong test” so what happened to the third prong? Well, the third prong has rarely been at issue in the past and almost no court has issued an opinion either validating or invalidating a non-compete contract based upon the third prong. So what is this rarely used third prong? It is whether the non-compete contract should be void as against public policy.
What could be more against the public policy in Virginia than to prohibit a recently fired or furloughed employee from going to work and feeding her family in a situation our country has not faced since World Wars I and II? Folks, I am not an alarmist but we are headed toward a downward financial spiral not seen in the lifetimes of most Americans. I cannot think of one good reason why a Virginia court would uphold a non-compete contract in these troubling times when to do so would hurt not only the involved employee/family but the whole Virginia economy.