Noncompete Agreements: Getting Them to Stick

Non-competition and non-solicitation clauses found in employment agreements often do not provide employers with the protection the employers assume they are getting. Virginia courts will refuse to enforce such “noncompetes” if they are written in vague terms or if they are broader than necessary to meet the employer’s legitimate business interests. As restraints on trade, restrictive covenants are disfavored by the courts. Consequently, any ambiguities in the contract will be construed in the employee’s favor. Fairfax Circuit Court Judge Michael F. Devine recently illustrated these principles in Daston Corp. v. MiCore Solutions, Inc., in which he upheld a nonsolicitation clause but struck down a noncompete agreement as unenforceable.

The case was brought by Daston Corporation, an information technology company that provides, among other things, a range of services based on Google Apps software, against two former employees who went to work for MiCore Solutions, a business offering similar services. Both employees had signed identical employment agreements with Daston containing both a noncompete clause and a nonsolicitation clause. The employees sought to dismiss Daston’s claims, arguing that the employment agreement’s restrictions were unenforceable. Judge Devine agreed in part and disagreed in part.

The court began its analysis by noting that, in Virginia, non-competition agreements will be enforced only “if the contract is narrowly drawn to protect the employer’s legitimate business interest, is not unduly burdensome on the employee’s ability to earn a living, and is not against public policy.”

The non-solicitation clause in question provided that, for a period of two years after the termination of employment, “Employee will not, directly or indirectly, solicit, invite or by any way, manner or means, attempt to induce any of Daston’s Customers to do business with a Competitor.” The court upheld the clause as enforceable, finding that stick_figures.jpgthe plain language is no broader than necessary to meet Daston’s legitimate interest and because it only applied to solicitations for services in direct competition with Daston’s services, or services developed by Daston with the employee’s assistance. The court observed that the non-solicitation clause did not unduly burden the employee’s ability to earn a living in his chosen field because it allowed the employee to solicit customers to provide them with services that do not directly compete with Daston’s services. The court rejected arguments that the language was impermissibly vague.

The noncompete, however, was deemed overbroad and unenforceable. The relevant language provided that, for one year after the termination of employment, “Employee will not…provide Services to any Client to which Employee…provided substantially similar or related Services during Employee’s employment was Daston.” The court found the phrase “substantially similar or related” to be both vague and overbroad in the sense that it appeared to restrict more than was necessary to protect Daston’s legitimate business interests. Therefore, the court struck the clause and severed it from the rest of the employment agreement (as permitted by the contract’s severability clause).

There are no guarantees when drafting noncompete agreements. As expressly noted by Judge Devine, language deemed enforceable in one case may be found overbroad and unenforceable in a different factual context. Each case will be decided on its unique facts. Still, there are certain considerations to keep in mind. First, do not make the noncompete broader than it really needs to be, either in terms of duration, geography, or scope. If the noncompete is overly broad, most Virginia judges will strike the clause in its entirety. They are not going to blue-pencil it to conform it to Virginia law. Similarly, ensure the language is not unduly burdensome on the employee’s ability to earn a living in his chosen field. The language should focus on restricting activities that directly compete with the employer’s services. Finally, write in plain English that is easy to understand. If the noncompete does not fairly apprise the employee of the prohibitions on his conduct, the clause will be stricken as impermissibly vague.

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