April 2, 2020

Non-Compete Agreements:

5 Things You Need to Know

By Erica Pero

Non-Compete, non-solicitation, and non-disclosure language in any contract can be intimidating. Collectively called “restrictive covenants”, these terms usually limit competition during and after the Agreement has ended. The thing is, they don’t need to be scary, especially in Virginia. Here are five things you need to know:

1. In general, there are typically only three elements of a non-compete: (a) length of time (usually in years or months), (b) manner (what you can do and for who), and (c) geographic scope (usually a radius in miles from a particular location).

2. You can’t get crazy – the “competition” must be real. In Virginia, non-competes are only enforceable to the extent they protect legitimate business interests. “Legitimate business interests” is a fancy phrase that means an employer can’t go crazy and prohibit competition willy-nilly. For example, if a non-compete restricts an employee from seeking employment within a 25-mile radius of your practice, you should make darn sure you can prove a significant portion of your customer base comes from at least 25 miles away.

3. What if it goes to court? In Virginia, the judge will toss out the non-compete if it is unreasonable; the contract will move forward as if there was no non-compete included. This is a big one, because here the judge will not “rewrite” a non-compete to make it reasonable. Rather, the judge will only enforce a reasonable non-compete or proceed with no non-compete at all. It’s important not to overreach!

4. Read the darn contract. I swear some lawyers write non-competes that are baffling, just to confuse the person signing the contract. READ THE NON-COMPETE AS MANY TIMES AS IT TAKES TO UNDERSTAND IT.

5. A radius is a radius – except when it’s not. Hampton Roads (or any water-laden area) presents its own set of unique challenges when it comes to non-competes. If you have a non-compete with a 10-mile radius but your employer is located near the Chesapeake Bay or the Atlantic Ocean, half of the radius is located over a body of water, significantly limiting your opportunity to find employment. Employers, you can get creative to describe the area you want to protect. If your practice is located on Shore Drive in Virginia Beach and you want to prevent competition in the “northeast quadrant of the I-64/I-264 interchange”, it wouldn’t be a circle – but it would certainly define the geographic area related to competition. It’s okay to get creative if it means drafting a reasonable non-compete.

Finally, if you have any questions about drafting a non-compete for an employee of your practice, or as an employee who wants to know how enforceable a non-compete might be, please consult a healthcare attorney. 

Erica Pero, an attorney with Pero Law, focuses her practice on health law. She helps healthcare professionals navigate the complexities of running a business in today’s healthcare industry. Pero Law is a lean law firm committed to excellent customer service and exceptional legal representation. perolaw.com