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Non-Compete Agreements in Virginia

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Non-Compete Agreements in Virginia

Non-compete agreements in the Commonwealth of Virginia have undergone a bit of a change since 2020. We represent employees in non-compete agreements with their former or soon-to-be-former employers.  A non-compete agreement is simply a contract where an employee or former employee agrees to a clause that bars competition with a former employer. If an individual violates the non-compete agreement or clause, there can be consequences or liability.

As a result, it is very important to obtain legal advice before signing a non-compete agreement if an employee is facing termination from employment or a decision to leave an employer.  We assist Virginia employees and executives in evaluating non-compete issues and in attempting to resolve them.  

What is a Non-Compete Agreement?

A non-compete agreement is a contract where an employee agrees to give up a right that they would otherwise have, in exchange for something from an employer. Quite often an employer ties a non-compete agreement or clause into severance payments.  

The general purpose of a non-compete agreement is to ensure that a former employee does not use the knowledge that they have gained with an employer and then later attempt to compete against them using this knowledge.    

Virginia Requirements for Non-Compete Agreements

In general, in order to be valid, a non-compete agreement in Virginia must be reasonable. An agreement that restrains competition, like a non-compete agreement “must be evaluated on its own merits, balancing the provisions of the contract with the circumstances of the businesses and employees involved.” Omniplex World Servs. Corp. v. US Investigations Servs, 618 S.E.2d 340, 342 (2005).

In Virginia, in order to be enforceable, a non-compete agreement must meet the following 3-part test, according to the Virginia Supreme Court. Under this test, the employer bears the burden to show that the non-compete agreement or clause is:

  1. no greater than necessary to protect a legitimate business interest;
  2. is not unduly harsh or oppressive in curtailing an employee’s ability to earn a livelihood; and
  3. is reasonable in light of sound public policy.

Modern Env’Ts v. Stinnett,  561 S.E.2d 694, 695 (Va. 2002);  Assurance Data v. Malyevac, 747 S.E.2d 804, 808 (Va. 2013); Gordon v. Blue Mt. Therapy, 2021 U.S. Dist. LEXIS 105432 (W.D. Va. June 4, 2021).  

Determining the enforceability of such an agreement “requires consideration of the agreement in terms of function, geographic scope, and duration, with these factors considered together.” Home Paramount Pest Control Cos., Inc. v. Shaffer, 718 S.E.2d 762, 764 (Va. 2011).

It is important to keep in mind that the courts when applying these tests in Virginia have become more employee-friendly in recent years. Non-compete agreements that are too vague or cumbersome may be invalidated. Courts are more likely to enforce non-compete agreements that are reasonable, have a limited geographic scope, and are precise in their terms. 

Virginia Recently Barred Non-Compete Agreements for Low-Wage Workers

Virginia has also added a new wrinkle to protect low-wage workers from non-compete agreements.  As of July 1, 2020, Virginia now prohibits employers from placing non-compete restrictions on low-wage employees. This law only applies to non-compete provisions that came into effect on or after July 1, 2020. See Virginia Code § 40.1-28.7:8.

Contact Us

When non-compete issues arise, it is important to get legal advice early and not wait until issues develop. These types of agreements, if already in effect, may still be renegotiated. If you are employed in Virginia and (1) have signed a non-compete agreement or (2) are considering signing an agreement to not compete, you should have the advice of a qualified Virginia employment lawyer. If you are in need of advice regarding non-compete agreements or clauses, please contact our office at 703-668-0070 or through our contact page to schedule a consultation. Please also visit and like us on Facebook or Twitter.

Problems with Non-Compete Agreements for Employers and Independent Contractors in Virginia

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By Kimberly H. Berry, Esq., www.berrylegal.com

An interesting question that has arisen recently is whether Virginia employers can use non-compete agreements with independent contractors. The answer is not entirely clear. There are many potential pitfalls for both the independent contractors that sign such agreements and the employers that attempt to enforce them. An employer may discover that its fully executed non-compete agreement with an independent contractor is unenforceable, but also subject itself to significant liability for misclassifying an employee.

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White House Proposes Changes to Non-Compete Agreements to States (including Virginia)

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By Kimberly Berry, Esq., www.berrylegal.com

The White House recently asked states to enact legislation banning non-compete agreements for low-wage workers in an effort to increase competition and improve the economy. In a White House report issued on October 25, 2016, it explained that these types of agreements often prevent out-of-work employees from finding new jobs in their career fields. The White House also stated that these non-compete agreements interfere with worker mobility.

A non-compete agreement typically bars an employee from working for a competitor or starting his or her own business once the employee leaves the employer. The White House report cited the fact that 20 percent of U.S. workers have signed non-compete agreements preventing them from working for competitors. The figure included an approximate 17 percent of employees who do not hold a college degree. Virginia is in the majority of states that current permits non-compete agreements to exist.  A minority of states have banned them as anti-competitive.

Proposed Changes to Non-Compete Agreements

The White House is requesting that states pass bans on non-compete agreements for workers who do not possess trade secrets. Additionally, the White House is asking that states require companies to be more transparent about contracts. The three principal recommendations in the White House report on state changes to non-compete agreements include:

1. Enact State Bans on Non-Compete Clauses for Certain Categories of Workers: (1) workers under a certain wage threshold; (2) workers in certain occupations involving public health and safety; (3) workers who are unlikely to possess trade secrets; or (4) those who may suffer undue adverse impacts from non-competes, such as workers laid off or terminated without cause.

2. Improvement in Transparency and Fairness: of non-compete agreements by, for example, disallowing non-competes unless they are proposed before a job offer or significant promotion has been accepted (because an applicant who has accepted an offer and declined other positions may have less bargaining power); providing consideration over and above continued employment for workers who sign non-compete agreements; or encouraging employers to better inform workers about the law in their state and the existence of non-competes in contracts and how they work.

3. Provide Incentives to Employers: to write enforceable contracts, and encourage the elimination of unenforceable provisions by, for example, promoting the use of the “red pencil doctrine,” which renders contracts with unenforceable provisions void in their entirety. Virginia currently follows this approach.

These proposed changes are hopefully raising more awareness regarding the issue of arbitrary and meaningless overuse of certain non-compete agreements. Unfortunately, it is not uncommon to see lower wage-earning employees being forced to sign unnecessary and overly restrictive non-compete agreements. However, there have been some positive developments, and three states have already enacted changes to non-compete agreements, including California, Oklahoma, Illinois and North Dakota.

Virginia Non-Compete Agreements

In Virginia, it is likely that there will be discussions about further limiting the scope of non-compete agreements in the future given the overuse of such agreements.  The general history for non-compete agreements in Virginia has been that they were disfavored at law, but permitted under certain circumstances.  The problem that the legislature will have to eventually take on eventually is whether they should bar non-compete agreements for workers earning lower wages and those who do not truly have access to proprietary information.

Conclusion

Our firm represents Virginia employees regarding employment matters and non-compete agreements. We can be contacted at www.berrylegal.com or by telephone at (703) 668-0070. Our Facebook page can be found at Berry & Berry Facebook Page.