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    The Greater Williamsburg area is an exciting place to live and work, especially because of the large number of entrepreneurs who have built businesses from the ground up. These entrepreneurs have taken their passion and made it their profession. Many of us want to take that step. Before you begin, you need to think of the type of business entity you want to form. Our attorneys have extensive business experience, from small one-person companies to publicly traded major corporations. Our attorneys are among the leaders in Virginia in the representation of Common Interest Communities. These communities are generally referred to as "homeowners associations," or "HOAs," and "condominium associations." In the greater Williamsburg area alone, we provide legal assistance to nearly 100 associations. Our attorneys have successfully prosecuted and defended a wide array of civil disputes involving community association covenant enforcement, commercial transactions, construction disputes, contracts, real estate matters, boundary line and easement disputes, employment matters, antitrust litigation, copyright violations, administrative proceedings, and estate issues. Real Estate law encompasses a wide variety of matters, and our attorneys have vast experience to assist you. Whether you need assistance with a commercial or residential closing, or you have questions relating to residential or commercial leasing, we provide experienced advice and counsel to our clients. Zoning law can be a complicated maze of statutes and ordinances. We have ample experience in successful applications for rezoning, variance, and special use permit requests. Finally, commercial and residential construction provide special challenges with respect to financing issues and the construction process. We serve as counsel to various financial institutions.

Can your business enforce an employee noncompete agreement?

The analysis of the enforceability of noncompete agreements begins with the question “How did the covenant not to compete arise?”  Employee covenants not to compete generally arise in one of two ways:  1) solely as a result of employment; and 2) arising as ancillary to another agreement, such as an agreement to purchase the prospective employee’s business.

Covenants not to compete that arise solely as a result of employment generally arise in two ways:  1) an agreement simply required in order to be employed; and 2) an agreement for which separate consideration is paid by the employer to the employee, other than the bare offer of employment. In Virginia, as much as a matter of fact as a matter of law, covenants not to compete demanded solely in order to obtain employment tend to be more “disfavored” by courts than covenants not to compete that were independently negotiated and compensated.  Further, covenants not to compete that arise from ancillary agreements, such as agreements to purchase businesses, tend to be even less disfavored by Virginia courts.  The reasons are obvious.  When a prospective employee is required to enter into a non-competition agreement solely as a condition of employment, without further consideration, the employee is not really getting anything in exchange for the agreement.  The employee is going to have to work in order to get paid.

In 2020, the Virginia General Assembly passed a new law prohibiting noncompetes “as to low-wage employees.” Such employees are determined as making less than the “average weekly wage” in the Commonwealth of Virginia, as determined by the Virginia Department of Labor and Industry.

However, for employees not covered by the noncompete statute, where the employee bargains with the employer for the non-competition agreement–such as when the employee gets paid for the agreement or obtains some other consideration, and where it is not simply a condition of employment–the equities shift somewhat in favor of the employer to whom the duty is owed.  The employer gave up something other than the mere right to work and the employee obtained the benefit.

Further, where such agreements are ancillary to other agreements, such as the sale of a business, the facts often suggest that the employee was compensated  for the agreement in the form of part of the purchase price of the business.  There the equities shift further in the direction of the employer.  Generally, it is considered bad form for a person to sell his business and subsequently move down the street and recreate it to compete with the buyer.

Therefore, depending upon your status as employee or employer, you will want to discuss with your lawyer the purpose for the noncompete agreement before it is executed.

Tarley Robinson, PLC, Attorneys and Counsellors at Law

Williamsburg, Virginia

John Tarley

John Tarley

John is the firm's managing partner and chairs the firm's small business, zoning, and litigation practice areas.

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Filed under: Business Planning, Merger & Acquisition, Neal J. Robinson by John Tarley

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