Non-Competes in Virginia: The Trend Against Enforceability Continues

Non-Competes in Virginia: The Trend Against Enforceability Continues

Apr 15, 2014

On March 6, 2014, Judge Bruce White of the Circuit Court of Fairfax County denied an injunction request by Wings, LLC (Wings), against two of its former employees who were providing the same services they had provided while working for Wings to Wings customers and former customers. Judge White ruled that Wings had not been irreparably harmed, thus they were unlikely to succeed on the merits of their claim. His analysis further demonstrates the needle’s eye that a Virginia non-compete must squeeze through to be deemed enforceable.

Wings provides commercial and residential vinyl, fabric and leather repair services largely, but not exclusively, to auto dealerships and collision repair services. Wings hired Jeffrey Manalansan and Cameron Fridey as technicians, and they signed substantially identical employment contracts. These contracts specified that the employees could not, for a period of 24 months after their employment ended, “solicit any customer who had received Wings services” within the prior 12 months or accept any employment that was “the same or substantially the same” as they had provided to Wings with any business that provided “material, labor or services that would compete” with the plaintiff. The limitation was to apply “within any state or country… in which, during the twelve months preceding Employee’s termination, Employer has conducted or conducts business.”

In November and December 2013, Manalansan and Fridey announced their departures from Wings. Each took a job with Capital Leather, LCC, a competing business founded by Wings owner’s son. When Wings saw a “considerable drop in revenue,” it sought an injunction against the two ex-employees and their new employer. Wings alleged that Manalansen and Fridey had received extensive training from Wings, been given access to Wings confidential methods and techniques, and been privy to pricing and financial information and confidential customer lists.

Judge White found that Wings had not suffered irreparable harm because whatever damages it might have suffered were measurable; therefore, compensable with money. Such reasoning would presumably undercut most injunction requests in non-compete cases, where the damages are ultimately measured by a loss in business and business revenue. But Judge White went further, ruling that Wings was unlikely to prevail on the merits because the 24 month non-compete period was excessive and the “geographic restriction … presents an unreasonable burden on the employees.”

Wings contended that it did business in Virginia, Maryland and West Virginia, and that while it did not do business throughout those entire states, it actively intended to expand its footprint within them. In Judge White’s view, the state-wide language made the restriction geographically overbroad and unenforceable. For example, it prevented the ex-employees from providing automotive leather repair services in distant Abington Virginia, where Wings does not do or contemplate doing business. In combination with the twenty-four month restriction, the provisions unreasonably burdened the employees’ opportunity to make a living.

What this Means for the Virginia Employer

Many recent Virginia non-compete challenges have focused on the description of competing services. Virginia law now requires a definition that would only prevent the former employee from providing the precisely the same services provided to the former employer. The Wings decision is a reminder that duration and geographical scope are measured by the same unforgiving standard as that applied to the scope of services. Any reasonable interpretation of a restriction that exceeds what is necessary to protect the proponent will be fatal to a non-competition provision.