When I wrote about how to enforce a noncompete agreement against a departed employee a couple of years ago, I made it sound pretty easy: write an enforceable noncompete agreement, then move for a preliminary injunction to prevent the employee from doing further damage to your business. It should be noted, however, that injunctive relief is considered an “extraordinary” remedy in Virginia and is by no means automatic, even if an employee is in clear violation of an enforceable noncompete agreement. A recent decision from Fairfax County showcases what can happen if the employer is unable to prove irreparable harm.
To obtain a preliminary injunction against a former employee, the employer needs to convince the court that all of the following are true: (1) the employer will suffer irreparable harm if a preliminary injunction is not granted; (2) the employee will not be harmed if the preliminary injunction is granted (or would suffer less than the employer would suffer if the injunction is denied; in other words, the “balance of equities” tips in the employer’s favor); (3) the employer will likely succeed on the merits (i.e., win the case) when it ultimately goes to trial; and (4) the public interest would be served (or at least not harmed) by granting the preliminary injunction. (See Real Truth About Obama, Inc. v. Fed. Election Comm’n, 575 F.3d 342 (4th Cir. 2009); Wings v. Capitol Leather, LLC, 88 Va. Cir. 83 (Fairfax 2014)).
Recruiting company Zachary Piper, LLC, recently sought a preliminary injunction against a former employee named Courtney Popelka and came up just short. (The case is Zachary Piper LLC v. Courtney Popelka, Fairfax County Circuit Court, Case No. CL2021-10123). The employer filed the case armed with a strong, well-written noncompete agreement but was unsuccessful in persuading the court that injunctive relief was actually needed.
The court agreed with the employer that the noncompete agreement itself was enforceable as written. This is what it said:
You will not, without the prior written consent of the [ZP Group]… for a period of 12 months following the last day of your affiliation with the Company Group, either individually or on behalf of or through any third party, directly or indirectly, contact, solicit, divert, appropriate, attempt to contact, solicit, divert or appropriate or provide services or products that are directly competitive with the services or products that you were engaged in providing on behalf of any Company Group entity to any Customer or Prospective Customer of the Company, or otherwise in any competitive manner be concerned with, connected with or employed by, or otherwise associate with any Customer or Prospective Customer of the Company in a role or position that is, directly or indirectly, competitive with the business of the Company.
The agreement defined a “Prospective Customer” as “any person or entity to which the Company Group has developed or made a sales presentation (or similar offering of services) during the two (2) years preceding your last date of affiliation with the Company Group and about which [employee] obtained Confidential Information through [her] affiliation with the Company Group…”
The court first addressed the likelihood that the employer would ultimately succeed on the merits of the case and agreed with the employer that the noncompete agreement was reasonable and therefore enforceable on its face. The noncompete lasted for only 12 months and prospective clients were limited to those to whom a pitch had been made within the previous two years and about whom the employee had obtained confidential information by virtue of her employment. And the agreement only prohibited her from working in a capacity directly competitive with the services she provided while working for ZP Group. The fact that the agreement contained no geographic limitation did not render the restriction unreasonable considering how narrowly the rest of the agreement was crafted. In short, the court found the noncompete agreement was enforceable and that the employee had breached it when she accepted a position with the company that had acquired a subsidiary business of the employer. Still, it refused to order her to quit her new position.
The court declined to issue a preliminary injunction because despite the fact the employer could likely prove the employee breached her employment agreement, the employer hadn’t really suffered “irreparable harm” as a result. At the same time, the employee would suffer grave harm if she were put out of a job, tipping the balance of equities in the employee’s favor.
In general, “a court may not grant injunctive relief unless a party has shown that party would suffer irreparable harm without the injunction, and that the party has no adequate remedy at law.” (May v. R.A. Yancey Lumber Corp., 297 Va. 1, 17-18 (2019)). In this case, the employer argued that the employee’s violation of her noncompete caused “significant and irreparable harm” to its business interests and that its customer goodwill had been severely damaged. However, the court noted that it had failed to identify a single prospective customer (other than the company the employee departed to) where the relationship was broken due to the employee’s leaving. No evidence was presented of any customers expressing dismay about the employee’s departure, and she apparently had not taken any of the employer’s confidential information with her to her new employer. The court seemed to suggest that not only had the employer failed to demonstrate irreparable harm, but had failed to demonstrate any harm whatsoever.
So the employee was allowed to keep her new job, at least for now. But the court’s opinion was not all good news for her. The court wrote that one reason it was going to let her remain employed was that she was going to need that income if she is later ordered to pay the plaintiff’s legal fees if and when it prevails at trial on its breach of contract claim.