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Virginia Supreme Court Upholds Termination Of Non-Compete With Agreement

Published by on January 15, 2009

In an unpublished order dated January 9, 2009, the Supreme Court of Virginia found that the termination of an employment contract also terminated the non-compete as a matter of law based on the language of the agreement.  A copy of the order is here.  More after the break. The employee in this case had entered […]

In an unpublished order dated January 9, 2009, the Supreme Court of Virginia found that the termination of an employment contract also terminated the non-compete as a matter of law based on the language of the agreement.  A copy of the order is here.  More after the break.

The employee in this case had entered into a three year employment contract with a company that provided obstetric and gynecological services in southeast Virginia.  The employment agreement included a termination provision with the following language:  “This agreement may be terminated by either employee or employer without cause and without any further obligations upon sixty (60) days advance written notice.”  The agreement also contained a non-compete covenant.  That provision barred the employee for a two year period from maintaining any interest or participating in any medical practice involving obstetrics or gynecological services within a twenty miles radius of the employer.  The agreement also contained a severability clause. 

The employee terminated the employment agreement by providing sixty (60) days’ advance written notice as provided in the agreement.  The employee then filed a complaint seeking a declaratory judgment that the covenant not to compete was void.  The circuit court found for the employee, concluding that the employee’s termination of the agreement also terminated the covenant not to compete.  On appeal, the employer argued that the severability provision in the covenant not to compete rendered it enforceable despite the termination of the agreement. 

The court agreed with the employee.  The court found that there was an unresolvable conflict between the severability provision and the termination provision, which allowed a termination “without any further obligation.”  In this case, the employer was the drafter of the agreement and the court therefore construed it against the employer.  The court therefore held that the advance notice terminated the entire agreement including the non-compete provision. 

Although this case may have hinged on the exact wording of the termination provision, non-compete decisions in other states have fallen on the same issue.  Careful attention must be taken when drafting non-compete agreements in Virginia.  Even with careful drafting, employers should be aware that the trend in cases such as this one (and others that we have previously posted on — for example, here) is to strictly construe non-compete provisions against the employer.

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