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Supreme Court strikes noncompete, says law has changed

An employee for a pest-control company who went to work for a competitor need not worry about that noncompete he signed some time ago. Today a divided Supreme Court of Virginia affirmed dismissal of the company’s suit to enforce the noncompete.

The take-away tip for lawyers drafting noncompetes: Make sure to match the activities you want to restrict to the activities the employee actually performed for the former employer.

Home Paramount Pest Control’s noncompete said that for two years, a former employee could not engage “directly or indirectly” in “any manner whatsoever” in conducting broadly identified activities of a pest control business. The high court surveyed its growing body of case law on noncompetes, and said the provision that appellant Home Paramount sought to enforce was more akin to noncompetes the court had struck in two decisions handed down in 2001.

When reviewing a noncompete, the Supreme Court said it consistently looks at the “function element” of the provision restricting competition to assess whether the prohibited activity is the “same type” of work the employee actually did for the former employer.

A former employee may find new employment with a past employer’s competitor if, in the new job, the employee “engages exclusively in activities that do not compete with the former employer,” wrote Justice William C. Mims for the majority.

Home Paramount’s noncompete provision would have prevented former employee Justin Shaffer from working in the pest control industry in any capacity. The provision’s language was so broad it would have restricted Shaffer from even being “a passive stockholder of a publicly traded international conglomerate with a pest control subsidiary, Mims said.

Yes, it’s true the Virginia Supreme Court upheld the identical language of Home Paramount’s noncompete over 20 years ago, but Mims said the court has “incrementally clarified the law” since it decided Paramount Termite Control Co. v. Rector in 1989.

Justice Elizabeth McClanahan dissented, emphasizing that Virginia business Home Paramount was “uniquely justified” in continuing to use the noncompete language previously sanctioned by the high court. She quoted an earlier comment by Justice A. Christian Compton that overruling prior cases made new decisions like a “restricted railroad ticket, good for this day and train only.”
By Deborah Elkins

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