Virginia Business Law Update

A Fairfax County Circuit Court judge awarded a Virginia information technology government contractor $172,395 in damages in a non-compete case against a former subcontractor. The court determined that the defendant subcontractor breached the covenant not-to-compete provision in its consulting agreement with the plaintiff government contractor.

A Virginia court will enforce a non-compete clause between an employer and an employee if it is: sufficiently narrowly drawn to protect the employer’s legitimate business interest; not unduly burdensome on the employee’s ability to earn a living; and, not against public policy. As restrictive covenants are generally disfavored in Virginia (as they restrain free trade), the employer bears the burden of proof and any ambiguities in the contract are construed in favor of the employee.

In this case, the court concluded that the covenant not-to-compete at issue was enforceable because it only prevented the subcontractor from working for two companies; it proscribed competition for only a year; and, it was specific as to the type of work that was prohibited under the agreement between the parties.

The damages awarded by the court to the plaintiff government contractor were based on the lost profits that the non-compete clause was supposed to prevent. As the court noted, “[a]warding damages on the breach of the agreement protects plaintiff’s legitimate business interest by compensating it for the breach.”

Preferred Systems Solutions, Inc. v. GP Consulting LLC, Circuit Court for Fairfax County, Virginia (July 28, 2011)