Unwritten Obligations in Virginia Employment Contracts
Most Virginians are unaware that they have certain legal obligations to their employer regardless of whether they have an employment contract. These duties are defined and created either by Virginia Code, or the common law. This means they are written into law, or over time, the courts have recognized these duties as part of Virginia’s legal system.
I understand that employees are rarely given lists or explanations of these duties. In fact, many Virginia employees are not aware that they may be held accountable for certain actions taken while an employee or shortly thereafter. They are surprised to learn they do not have the right to start their own business, compete, etc.
Sadly, ignorance is no defense under the law.
Here is a brief description of some of common law duties and those defined by Virginia Code. These are not optional and a breach of any of these duties, or even the appearance of breach could lead you to the courtroom.
1. VIRGINIA TRADE SECRET ACT
Virginia Code defines a trade secret as “information that derives independent economic value from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” Va. Code Ann. § 59.1-336.
Virginia Code defines “misappropriated” as either “acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or disclosure or use of a trade secret of another, without express or implied consent…” Va. Code Ann. § 59.1-336.
If you use secret information from company A, for your own benefit, or take it to company B, you could be in violation of the trade secret act. This could include the following information:
- Customer lists
- Price lists
- Information protected by patent, trademark, copyright
If the information you want to re-use is available to the public (website, bid sheets etc.) then it can be used. If however, it is not available to the public, then it is always better not to count on that information.
Of course, this could include your work product at the old firm. If you are developing a new technology, and agreed in writing it was the property of company A, you do not have a legal right to take it to company B and could be in violation of the trade secret act.
2. TORTIOUS INTERFERENCE OF CONTRACT
3. TORTIOUS INTERFERENCE WITH BUSINESS EXPECTANCY
Under Virginia law, the following elements must exist in a claim of tortious interference with contract/business expectancy: (1) existence of a contract / business expectancy; (2) knowledge of that expectancy; (3) intentional interference; (4) use of improper means or methods to interfere; (5) damages as a result.
If you were to solicit clients, customers or vendors to leave your employer and go work with you, or another company, and the clients did move, you could be held liable for tortious interference of business expectancy. If you intend to terminate an existing contract between two parties, you could be held liable for tortious interference with contract.
You have the right to compete in Virginia, but you do not have the legal right to poach business when you know it is expected elsewhere. General mailings, advertising etc. is acceptable, but intentional interference with the goal to end business elsewhere is not permitted.
4. FIDUCIARY DUTY OF LOYALTY
Virginia employees have a duty of loyalty to their employers. What does that mean? Stated simply, it means that you cannot compete with your employer while an employee. You cannot take business away for yourself or others or even plan to do so. If you are employed, your duty is to promote that business only, and no other.
- Practically speaking, the following actions are prohibited under your duty of loyalty:
- Funneling business away from employer to self or another company
- Asking clients to follow you when you open your new business
- Asking vendors or contacts to work with you when you open a new business
- Starting your own competing business (this includes corporate formation, registration with IRS, etc)
- Asking employees to leave with you and start a new business
Under Virginia law, the following actions are allowed, but often lead to litigation:
- Allowed to make future employment plans while employed
- Allowed to plan (theoretically), your new business.
Although the Supreme Court states that the duty ends when the employment ends, employers are allowed to file suit after the employee has left regarding past breaches.
ADVICE: Don’t make plans to compete, until you have left. Don’t get a tax ID, start a website, or solicit clients until you are no longer on the payroll at Company 1.
Virginia recognizes two types of actionable defamation: defamation per se and defamation with proof of special damages. At common law, defamatory words are actionable per se if: (1) they impute to a person the commission of some criminal offense involving moral turpitude; (2) they impute to a person infection of some contagious disease; (3) they impute to a person unfitness to perform a job; and (4) they prejudice a person in his profession or trade.
For the alleged statements be defamatory in general terms, the inquiry is whether any such statement creates a substantial danger to one’s reputation or character.
What kinds of statements may be considered defamatory about an old employer?
- “Don’t hire them, they are going under.”
- “Don’t work with that company, they are all jerks and will steal your money.”
- “ABC Company has filed for bankruptcy and can’t pay their vendors, hire me instead!”
- Although defamation is hard to prove, these comments often motivate companies to file suit against old employees.
ADVICE: keep these comments to yourself. Don’t email, write or say ANYTHING negative about your old company. Take the high road, it rarely leads to litigation.
If you find yourself needing assistance in defending any of the above claims in the Commonwealth, do not hesitate to contact our office today at 1-866-985-0098.