A covenant not to compete is enforceable, though the courts will interpret it narrowly and strictly. A court will restrain an employee from working so long as the employer proves that:
1. The employer has a protectable interest in certain business activity (definition);
2. The geographic restraint of competition is reasonable (definition);
3. Time period of the restraint is reasonable (definition); and,
4. The absence of an undue hardship on the employee (definition), and
5. The employer paid good and valuable consideration for the non-compete clause (definition).
Covenants in restraint of business activity are not favored, will be strictly construed, and in the event of an ambiguity, will be construed in favor of the worker. Richardson v. Paxton Co., 203 Va. 790, 795, 127 S.E.2d 113, 117 (1962). It is the employer’s burden to prove that the restraint sought is no greater than necessary to protect a legitimate business interest, is not unduly harsh or oppressive in curtailing an employee’s ability to earn a livelihood, and is reasonable in light of sound public policy. Roanoke Engineering Sales Co., Inc. v. Rosenbaum, 223 Va.548, 552, 290 S.E.2d 882, 884 (1982).
Reasonable Restraints.
If a restrictive covenant is supported by sufficient consideration and is ancillary to an employment agreement, a worker’s agreement not to compete against her employer upon leaving employment will be upheld if the restraint is reasonable in terms of length of time and geographic scope as to not create an undue hardship on the employee. Concord Orthopaedics Professional Association v. Forbes, 142 N.H. 440, 444-45; 702 A.2d 1273 (1997); Smith, Batchelder & Rugg v. Foster, 119 N.H. 679, 406 A.2d 1310, 1312 (1979); Becker v. Bailey, 268 Md. 93, 299 A.2d 835, 838 (1973); Knoebel Mercantile Co. v. Siders, 165 Colo. 393, 439 P.2d 355, 358 (1968).
Restatement (Second) of Contracts
Section 186 of the RESTATEMENT (SECOND) OF CONTRACTS provides that a promise is unenforceable on the grounds of public policy if it is unreasonably in restraint of trade. A promise is in restraint of trade if its performance would restrict the promissor in the exercise of a gainful occupation. Such promises are unreasonable if they are greater than needed to protect the employer’s interests or the employer’s need is outweighed by the hardship to the employee or the likely injury to the public. RESTATEMENT § 188. See Ellis v. James V. Hurson, 565 A.2d 615, 618 (D.C. 1989).
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