Invalidating a non-compete agreement it found enforceable over 20 years earlier, on November 4, 2011 the Supreme Court of Virginia, in Home Paramount Pest Control Companies, Inc. vs. Shaffer, No. 101837, 2011 Va. Lexis 222 (2011) reaffirmed the position that a non-compete is enforceable if it is “narrowly drawn to protect the employer’s legitimate business interest…”.
Justin Shaffer, an employee of Home Paramount Pest Control Companies, Inc. (“Home Paramount”) signed an employment agreement containing a non-compete provision. The relevant portion of the provision was as follows:
The Employee will not engage directly or indirectly or concern himself/herself in any manner whatsoever in the carrying on or conducting the business of exterminating, pest control, termite control and/or fumigation services 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, or in any manner whatsoever, …”
About 7 months after signing the non-compete, Shaffer resigned and subsequently became employed by a competitor. Home Paramount sued alleging, among other things, that Shaffer had violated the non-compete. Shaffer responded by challenging the non-compete on the basis that it was overbroad and therefore unenforceable. The Circuit Court agreed.
On review, acknowledging that it had enforced an identical non-compete provision involving the same company in 1989, the Supreme Court noted that it considers the “function, geographic scope, and duration” elements of the restriction together, rather than as three separate issues. Looking at the function element, the Court reminded that it consistently examined whether “the prohibited activity is of the same type as that actually engaged in by the former employer”. Finding, on its face, that the agreement prohibited Shaffer from working for any business in the pest control industry in any capacity, even from engaging in an indirect manner, the Court held that the agreement was unenforceable. While it noted that this was a change from its prior holding, the Court pointed to a gradual refinement of its position over the years. It further noted that the clear overbreadth of the agreement rendered it unsaveable by a narrow tailoring of geographic scope or duration.
Home Paramount reminds employers seeking to utilize non-compete agreements that to be valid and enforceable, those agreements must be narrowly drawn - prohibiting activity of the same type as that actually engaged in by the employee while employed by the former employer.
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