To Enjoin Violation of Non-Compete, Must Prove Legitimate Business Interest

To obtain a preliminary injunction in Virginia, a plaintiff must show (1) that he is likely to succeed on the merits; (2) that he is likely to suffer irreparable harm in the absence of preliminary relief; (3) that the balance of equities tips in his favor; and (4) that an injunction is in the public interest. Real Truth About Obama v. Federal Election Com’n, 575 F.3d 342 (4th Cir. 2009). To enjoin an ex-employee from violating his non-compete agreement, getting past the first element requires the plaintiff to persuade the court that the noncompete is no broader than necessary to protect a legitimate business interest. Courts will examine the function, scope, duration, and overall reasonableness of the restriction when making this determination. An opinion issued earlier this month in Fairfax County Circuit Court demonstrates what a high burden this can be for a plaintiff seeking to prevent its employees from working for a competitor.

Wings, LLC, provides commercial and residential vinyl, fabric, and leather repair services in Northern Virginia, the District of Columbia, Southern Maryland, and West Virginia. Wings’ customers consist primarily of auto dealerships and collision centers who hire Wings to repair car interiors on site. Wings hired two gentlemen as vinyl, velour and leather repair technicians and required them to sign agreements containing non-solicitation and non-competition provisions that prohibited them from working as technicians anywhere in Virginia, Maryland, West Virginia, and any other state in which Wings transacted business, for a period of two years following the termination of employment. (See pages 2 and 3 of the opinion for the full text of the noncompete provision).

The two employees eventually left Wings and began working for a competing company, Capitol Leather, LLC. Wings sued its former employees and Capitol Leather and moved for a temporary restraining order and preliminary injunction, asking the court to enjoin the employees from working for Capitol Leather as technicians and from soliciting Wings’ customers. After an leatherinterior.jpgevidentiary hearing, the court found that the employees had clearly breached the agreement, but nevertheless denied the injunction due primarily to Wings’ failure to establish that it was likely to succeed on the merits.

The noncompete provisions, the court held, were overly broad as a matter of law, and therefore unenforceable. Wings’ Virginia customers are concentrated in Northern Virginia. Wings could only restrict its former employees from working in other parts of Virginia if it had a legitimate business interest in such a restriction. At the evidentiary hearing, however, Wings focused its efforts on proving breach of the agreement, and presented no evidence of any business interest in preventing its former employees from earning a living hundreds of miles away from where Wings actually conducts business. This proved fatal to its efforts to enforce the noncompete.

The severity of the restrictions was compounded by the burdensome two-year period for which they applied. Although prior Virginia cases have found two-year covenants to be reasonable in certain circumstances, the duration of the restriction must be considered together with its scope in determining overall reasonableness. The court held that the two-year duration was unreasonable when coupled with the broad geographic restriction, as the clause as a whole would put a significant burden on the employees’ ability to earn a living.

Wings’ failure to demonstrate a likelihood of success on the merits was all the court needed to deny its request for a preliminary injunction, but the court went on to hold that the denial of injunctive relief would not result in irreparable harm, finding that even if the noncompete were enforceable, money damages would likely be sufficient to compensate for its breach.

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