The Supreme Court of Virginia disfavors non-compete agreements:
- Restrictions on trade, such as non-compete and non-solicitation agreements, are disfavored under Virginia law. Simmons v. Miller, 261 Va 561, 580, 544 S.E.2d 666, 678 (2001). Whether the covenant not-to-compete is enforceable is a question of law. Id.
Yet, hundreds of state circuit courts and federal district courts have found employment agreements containing non-compete language to be enforceable in Virginia. Whether a non-compete agreement will be enforceable against you is an issue that will be decided by the court on a case-by-case basis. The following questions generally guide the court’s analysis: (1) Is the agreement itself a valid contract? (2) If the contract is valid, is it reasonable? (3) If valid and reasonable, has the employee breached the contract? (4) If the employee breached the contract, did he cause any damages?
Since restrictive covenants are disfavored restraints on trade, the Virginia law also holds that non-compete clauses must be strictly construed against the employer. If the language of the contract is ambiguous, the language will be read by the court against the employer, rather than the employee. Okay, enough legal speak. In practical terms, here is a summary of relevant Virginia non-compete law:
- Every agreement will be reviewed individually.
- Although non-compete agreements are disfavored, if reasonable, courts will enforce the agreements.
- There is no magic litmus test to determine whether your agreement will be deemed valid or reasonable – but there are guidelines that can help us predict.
- The court will review the geographic scope, function, and duration of your non-compete agreement to determine whether the contract is enforceable.
- In enforcing a non-compete agreement, the court balances an employee’s right to secure gainful employment against his former employer’s legitimate business interests.
Further, the employer has the burden to prove the four factors outlined below:
- Is the contract valid?
- Is the contract reasonable?
- If the contract is both valid and reasonable, did the employee breach it?
- If the employee did breach the contract, was the employer damaged?
- If you signed an agreement months or years ago and are now curious as to whether it can be enforced, skip ahead to the next chapters. If you have already received word your employer is seeking legal action against you for breaching your non-compete, go to Chapter 3 – quick.
What Do You Do When Asked to Sign a Non- Compete Agreement?
Here’s what you need to do if you have been asked to a sign a non-compete agreement.
1. Read the Contract
Chances are you did not read your cell phone contract in great detail. I would be shocked if you recall reading your credit card contract before signing on the dotted line. Please do not approach your employment contract with the same urgency to sign on the dotted line.
If presented with a contract to sign, ask for time to read it. Ask if you can take it home to read it in your free time. Read every word and paragraph until you understand the terms of the agreement. If you don’t understand, ask questions.
2. Ask Questions
We get calls frequently from employees wanting us to review their non-compete contracts. Typically they call us when they are leaving their job and want to know how their old agreement affects their new job choices and options.When I ask them what they understand the agreement to mean, most often I am told “I don’t know what that means,” or “I am not sure why that clause is in there, I never asked.”
Here is a good list of topics you should know the answers to:
- Choice of Law – If you live and work in Virginia, and another state’s law applies to the contract, find out why.
Geographic Scope – Find out why the contract forbids you from working anywhere in three states. Does your employer do business there or is that a catch-all provision?
- Other Employees– If you are being asked to sign one, and no one else is, you need to know that answer.
“Clients” – Ask what does “clients” really mean and who are they?
- Arbitration – Many attorneys are inserting arbitration provisions in employment contracts. Find out why. Chances are your employer doesn’t know what this means, and may not want the added cost of arbitration.
The moral of the story is that you have every right to ask questions. If you know the terms of the agreement, and what they mean, you can make an educated and informed decision as to whether you are willing to sign the agreement.
3. Speak with an Attorney
Your employment agreement is a contract. Even if you are satisfied that you understand the agreement, pay an attorney to review the contract and explain the legal issues contained in the agreement. Chances are good the employer had an attorney draft the agreement, so why not start off on equal footing by having your own counsel explain the agreement?
You have a right to have any and all contracts reviewed by legal counsel prior to signing. Exercising this right may save you time and money in the long run.
There are companies that are happy to discuss and negotiate terms of their employee’s contracts. There are also employers that refuse to negotiate and often will tell prospective employees they can “take or leave” the job. Want to find out what kind of company you work for? Ask around – ask other employees. You may find that your employer is very willing to change or alter terms contained in the agreement. After all, I doubt he personally drafted it.
That said, I advise you to negotiate with some hesitation. In Virginia, employers don’t have any legal obligation to negotiate terms, and can deny you the job should you refuse to sign the agreement. Fair or not, negotiating may cause bad blood between you and your new employer. We have had clients negotiate terms successfully, and others who find the mere mention of the word causes problems.
If you are being presented with a non-compete agreement, or any employment contract, severance package, or confidentiality agreement, do not sign until you have given thought to what it means. At the very least, read it and ask questions. As mentioned above, the agreement was written for your employer by an attorney. It is worth speaking with an attorney to read the contract in advance and explain the agreement prior to signing.