Wings LLC, a company that specializes in vehicle interior repair, had its motion for Temporary Restraining Order and Preliminary Injunction denied on March 6th, 2014. Wings was attempting to enforce noncompete and nonsolicitation agreements signed by two of their ex-employees after they began working for Capitol Leather, LLC.
The agreement stated that for 2 years after leaving Wings, the employees could not directly solicit any company that had been a customer of Wings in the last 12 months of their employment. The agreement also stated that the ex-employees could not hold a position that was the same or similar to their job at Wings at a company who produced anything in the last year that would compete with Wings, and would apply to any U.S. state or foreign country that Wings had done business with in that last year.
The Fairfax Circuit judge ruled that the geographic restriction was too broad to enforce, as it would severely impact both ex-employees’ ability to obtain a new job in the area they live in.
The key point to take away from this case is the importance of narrowly tailoring the geographic limitations of a noncompete. The majority of Wings’ customers are auto dealerships and collision centers who hire them to repair the interior of their cars from a local site. Wing’s customers have to be within a reasonable driving distance to a Wings location in order to use their services, which essentially confines their customer base to a smaller area.
By dictating that ex-employees could not do business in any state that Wings had provided services to in the last year, it was barring them from working at a company that could possibly be 300 miles away in the same state, in an area that Wings does not have regular business. Wings did not have a legitimate business interest in restricting the ex-employees from working as technicians for 2 years in the entire states of Virginia, Maryland and West Virginia.
The court’s ruling demonstrates the importance of employers narrowly tailoring the geographic restrictions of non-competes to regions in which the employer actually engages in business. Employers are likely best served in reducing the geographic restrictions to the smallest possible radius or political unit (such as a county, town or city) in which the employer conducts its business.
Click here to read the Court’s opinion.