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On November 4, 2011, the Virginia Supreme Court struck an entire non-compete provision in an employment agreement for containing language that was too broad. Although many states will simply “blue pencil” the non-compete by striking only those overly broad portions, the Virginia Supreme Court reinforced the trend in wholly striking down overbroad non-competes in Home Paramount Pest Control Companies, Inc. v. Justin Shaffer, et. al. 

Justin Shaffer was an employee of Home Paramount Pest Control Companies, Inc. and signed an employment agreement with his employer containing a non-compete clause that restricted him from engaging in “any manner whatsoever” in a pest control or similar business as an owner, agent, servant, representative, or employee, and/or as a member of a partnership and/or as an officer, director or stockholder of any corporation. After working at Home Paramount, he became employed with Connor’s Termite and Pest Control, Inc. Paramount sued alleging breach of contract.
In determining whether a non-compete is enforceable, Virginia courts consider function, geographic scope, and duration. Here the Virginia Supreme Court emphasized that even if the scope and duration elements of the non-compete minimally restrict the former employee, this does not make up for an overly strict function. In considering the function element, the court has consistently considered whether the prohibited activity is of the same type as that actually engaged in by the former employer.  Prohibiting former employees from working in the same industry in a role which would compete with the business of the former employer is generally acceptable.  When employers use provisions prohibiting employees from working in any capacity for the same type of company, they go too far.  Blanket prohibitions against working for a competitor are inappropriate. An agreement restricting competition is enforceable only if it “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. Opinion at 2, quoting Omniplex World Servs. Corp v. U.S. Investigations Servs., Inc., 270 Va. 246, 249 (2005). A former employee may engage in activities that do not compete with the former employer. When a former employer prohibits a former employee from working for its competitors in any capacity and does not restrict the function component, it must have a legitimate business interest that it can prove in order for the restriction to be valid.
Here, the provision at issue went too far and prohibited Shaffer from working for a business in the pest control industry in any capacity. The provision did not limit the function element to those activities it actually engaged in.  The provision went so far as to bar Shaffer from merely being a “passive stockholder of a publicly traded international conglomerate with a pest control subsidiary.” Opinion at 7. Although the court upheld a non-compete containing identical language in the 1980s, it explained that changes in law since then justified overruling Home Paramount’s non-compete.

The Virginia Supreme Court has become more aggressive in striking down broad non-competes. Virginia employers should be careful to not use broad language in non-competes or risk losing the entire agreement- a grave penalty for not taking the time to narrowly tailor the non-compete. Specifically, to satisfy the function element, Virginia employers should restrict only activities that are of the same kind the employee performed for that employer.