Virginia Supreme Court Invalidates Overbroad Non-Compete

November 4th, 2011 by JBWK

In an opinion released today, the Virginia Supreme Court struck a non-compete agreement between a pest control company and an employee that prohibited the employee from working in any capacity for a competitor.

In Home Paramount Pest Control Companies, Inc. v. Shaffer, the Court addressed only the so-called “function” prong of the analysis. Non-competes must be reasonable in: (1) the type of work from which the former employee is barred; (2) the geographic scope of the restriction; and (3) the duration of the restriction.

Only the first element was at issue in this case. Everyone agreed the geographic and time restrictions were reasonable; however, the overbreadth of the “function” element scuttled the entire agreement. It prohibited the employee from working for (or owning or “being concerned with”) any competing pest control company in any capacity. Affirming the trial court’s decision, the Supreme Court held that the employer’s legitimate business interests could not justify barring the employee from working in any capacity whatsoever for a competitor (for example, a mechanic on a competitor’s trucks, a bookkeeper, or a janitor). The company could only legitimately restrict the employee from performing services that compete with those actually offered and engaged in by the company.

Given the harsh effects of drafting an overbroad non-compete agreement, it is vital to ensure that all non-compete agreements are reasonable in all three of the necessary elements.

 

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