Virginia Supreme Court Narrows Non-Compete Enforceability

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In Home Paramount Pest Control Cos. v. Shaffer [pdf], the Virginia Supreme Court ruled that a covenant not to compete was overbroad and unenforceable, even though it was identical to a covenant the court had upheld 22 years earlier in Paramount Termite Control Co. v. Rector, 238 Va. 171 (1989). Acknowledging this, the court expressly overruled its holding in Paramount Termite.

Shaffer’s agreement prohibited him from ". . . engag[ing] directly or indirectly or concern[ing] himself . . . in any manner whatsoever in the carrying on or conducting the business of exterminating, pest control, termite control and/or fumigation services" in any city or county in which he worked for two years after separating from employment. After resigning from the company, and within the two-year period, he became employed by another pest control company and engaged in competing activities. The company filed suit to enforce the covenant.

Emphasizing that the restrictive covenant was not limited to preventing the former employee from engaging in activity that competes with the company, the court reasoned that the employer bore the burden of proving a legitimate business interest in prohibiting the former employee from working in any capacity for a competitor.  The court observed that the covenant "bars [the former employee] from engaging even indirectly . . . in the pest control business," even as a stockholder in a public company with a pest control subsidiary. In the court's view, this provision was so overbroad that it could not be saved by the agreement's limited geographic scope and duration (two years).

For more on Shaffer, continue reading at Littler’s ASAP: Supreme Court of Virginia Continues Narrowing the Enforceability of Covenants Not to Compete

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.