Friday, October 12, 2012

Court Finds Language in Non-Compete Which Would Restrict Employee From Working For A Competitor in Any Capacity to Be Facially Overbroad


In Home Paramount Pest Control Cos., Inc. v. Shaffer, 718 S.E.2d 762 (Va. 2011), the Virginia Supreme Court was asked to rule on the validity of a non-compete agreement which prohibited the defendant former employee, for two years, from:

Engage[ing] directly or indirectly or concern[ing] 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 owner, agent…stockholder.

The Virginia Supreme Court affirmed the decision of the circuit court finding that this restriction was facially over-broad because it restricted defendant from working for any competitor, even in a capacity completely different from that in which he worked for his former employer.  The Court further noted that, on its face, this language prohibited defendant from owning stock in a publicly traded company which owned a pest control business.  The Court found that both these “sweeping prohibition[s]” exceeded plaintiff’s legitimate business interests and unduly burdened defendant’s right to earn a living.  

In so doing, the Court upheld the lower court’s ruling which required that “[w]hen a former employer seeks to prohibit its former employees from working for its competitors in any capacity, it must prove a legitimate business interest for doing so.”  In so holding, the Court overruled its opinion upholding the exact same non-compete in Paramount Termite Control Co. v. Rector, 380 S.E.2d 922 (1989), which suit was brought by plaintiff’s predecessor.

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