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Posted on Friday, June 22, 2012

Non-Compete Agreements: Overly Broad and Unenforceable?

An employee for Virginia-based Paramount Pest Control Company left to go work for a competing pest control company, and once there, he actively solicited Paramount’s customers.  The employee had signed a non-compete agreement with Paramount, which prohibited him for a period of two years from working in any capacity with a competing pest control company in any city or county where Paramount operated.  Paramount’s exact non-compete language had previously been found by the Virginia Supreme Court to be enforceable.   Paramount sued the former employee for violating his non-compete.

Who won–Paramount or the ex-employee?
The ex-employee did, after the Virginia Supreme Court this past Friday found Paramount’s non-compete overly broad and therefore unenforceable, because it restricted the employee from taking any job at a competitor, not just a job that would compete with Paramount’s business.  This defect in the non-compete is commonly referred to as the “janitor defense,” since a broad provision like the one in this case would prohibit an employee from working even as a janitor at a competing company.
Incredibly, in 1989 the Virginia Supreme Court had found the exact same Paramount non-compete provision to be fine and fully enforceable.  But the Court recognized that times had changed in the twenty years since that decision, and that Virginia (like many other states) now requires a non-compete to be expressly limited to the same or similar job positions previously held by the employee that would actually compete with the work of the former company.

This case is perhaps the best illustration that non-compete agreements need to be reviewed and updated at least every two years, if not more frequently, to take into account changes in the law.

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