Drafting Non-Competes Is Risky Business

For those of you who draft, work with and seek to enforce restrictive covenants, pay particular attention to the recent November 2011 Virginia Supreme Court decision in Home Paramount Pest Control Companies, Inc. v. Shaffer.

At first blush, the case appears to be nothing more than another decision in a long line of recent decisions in which the Court rules in favor of the employee against the employer by finding the non-compete provision in an employment agreement over broad and therefore unenforceable. However, this decision commands attention because in it the Court considered the very same provision for the very same company that it considered in another non-compete case in 1989. In 1989, the Court held that provision enforceable. In last week’s decision, the court found the same provision unenforceable.

So what was different? Well, obviously the particular employee was, and this made a difference with the Court’s assessment of the duties and functions this particular employee had with the employer. The Court consistently applies the same basic test of enforceability for non-competes: Is it “narrowly drawn to protect the employer’s legitimate business interests, not unduly burdensome on the employee’s ability to earn a living, and not against public policy?” The court evaluates these limitations based on geographic scope, time duration and function.