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Top Ten Issues In Employment Law For HR Professionals In Virginia in 2008: #9

Published by on January 28, 2009

We will be posting over the next week the top ten developments in employment law for HR professionals in Virginia in 2008.  The list is in no particular order.  Topic number 9 is: Developments in Non-Competition Agreements.  More after the break. Non-competition clauses continue to be ripe for litigation.  In the current economy, employers can anticipate […]

We will be posting over the next week the top ten developments in employment law for HR professionals in Virginia in 2008.  The list is in no particular order.  Topic number 9 is:

Developments in Non-Competition Agreements.  More after the break.

Non-competition clauses continue to be ripe for litigation.  In the current economy, employers can anticipate an increase in employee mobility and, in turn, an increase in the amount of former employees who will stretch the boundaries of the agreements they entered into.  While Courts typically analyze non-competes on a case-by-case basis and decisions are largely fact-based and thus tough to forecast, employers using such agreements in Virginia would be well advised to have them reviewed and updated for continued viability.

For example, the scope of the agreement in question was analyzed by the U.S. District Court for the Eastern District of Virginia in granting a motion to dismiss breach of contract claims relating to an employee noncompete and nonsolicitation agreement in Nortel Communications, Inc. v. Carl Lee-Llacer.  The court granted the motion because the provisions of the agreement at issue were not limited to the performance of the same work the employee had done for the company and because key terms were undefined.  This opinion highlights the changing law regarding noncompete agreements in Virginia during recent years. 

The employer in this case was involved in information technology consulting.  The employee had signed a standard noncompetition and nonsolicitation agreement, which provided he could not perform services for clients of the company or work for a competing business, among other things.  After leaving the company and alleging performing services for a customer, the employer brought suit.  In the employee’s motion to dismiss, the court looked at the scope of the noncompetition and nonsolicitation clauses.  The court noted that such clauses are upheld “only to the extent that the proscribed functions are the same functions as were performed for the former employer.”  The court found the agreement wanting for a number of reasons.

Legal precedent was also heavily relied upon in Combined Insurance Company v. Weist, where the Western District of Virginia denied an individual’s motion to dismiss a case involving his resignation and acceptance of a position with a competitor.  Defendant’s first contention was that the non-competition clause and the prohibition on solicitation were unenforceable because they were vague and geographically overbroad. Specifically, defendant argued that these covenants were overbroad and vague because they were limited to “any geographic areas for which the Executive has been responsible during the two year period before the date the Executive’s employment terminates.”  The court found this language to be permissible as the Supreme Court of Virginia upheld covenants that were “virtually indistinguishable from the ones at issue here, where the geographical limitation is defined with reference to the territories in which an employee worked prior to termination.”  Additionally the court noted that Virginia courts have upheld non-competition clauses that are limited to a former employer’s actual customers.

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