Virginia courts will enforce non-compete contracts which are reasonable in length and geographical scope. In other words, Virginia courts will not enforce a non-compete agreement which prohibits competition for 10 years any where in the world.
But…it looks like state courts in Connecticut will!
This month in Xplore Technologies Corp. v. Killion, a Connecticut state court examined whether a non-competition clause that had no specified geographic requirement was enforceable. The Court enforced the clause and held that the geographic area was defined by the uniqueness of the product at issue and the limited potential customers for it.
The plaintiff developed computer tablets intended for work under extreme conditions, such as the military or outdoor work for a company such as AT&T. The plaintiff’s only competitors in the business were Panasonic, Dell and the defendant DRS Technologies, Inc.(DRS). A former employee, who was employed by the plaintiff for approximately six years, agreed to join DRS to promote products and services, including the computer tablet, to businesses like AT&T. When the plaintiff sought an injunction to enforce the non-competition clause, DRS argued, among other things, that the clause was unenforceable because it had no geographic limit.
The Court rejected DRS’s defense and concluded that the geographic area was defined by the territory where the three competing companies marketed the rugged computer. The Court stated that with the technical advancements in Internet sales, a set of number of miles from an office is a useless measure in a non-compete agreement.
My Take: This is a bad decision and extremely unfair to employees. I just hope this type of “wrong-headed thinking” does not make its way to Virginia!