Where Does Your State Stand on Non-Compete Agreements?

While non-compete agreements are fairly common in today’s business world, states treat them differently. For example, Virginia disfavors non-compete agreements and will not enforce them unless they are narrowly tailored to protect legitimate business interests. In Georgia, recently passed business-friendly legislation makes non-competes easier to enforce. In addition, some states like Virginia will not modify or “blue-pencil” overly restrictive non-compete agreements to make them reasonable and enforceable; while other states, like Georgia, endorse “blue-penciling.” In states where “blue-penciling” is permitted, a court may find a non-compete provision to be overbroad and modify the provision so that it is reasonable. As a result, employers in those jurisdictions can be more aggressive in defining broad restrictions. In contrast, in states like Virginia where “blue-penciling” appears to be prohibited1, it is an all-or-nothing situation for the employer—the non-compete is either enforceable as drafted or invalid if overly broad. It is crucial for an employer to know the law of the state or states that it is operating in and keep abreast of changes.

The Virginia Supreme Court recently reiterated its tough stance on non-compete agreements in Home Paramount Pest Control Company, Inc. v. Shaffer, 282 Va. 412, 718 S.E.2d 762 (2011)2, when it ruled a non-compete provision in an exterminator’s employment contract was unenforceable because the terms were too restrictive. The Virginia General Assembly also defeated a bill introduced in its 2012 session (House Bill 1187) that proposed to ban most restrictions on former employees’ ability to engage in lawful professions, trades or businesses. While that bill was not passed, the Shaffer decision makes clear that Virginia courts still remain hostile to non-compete agreements. The opinion in Shaffer not only provides insight into the rationale underlying Virginia’s tough stance on non-competes, it offers best practices for avoiding drafting pitfalls in states that are hostile to these provisions.