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Covenant not to compete unenforceable, Supreme Court holds

A covenant not to compete in an employment contract created an ambiguity in the agreement and cannot be enforced by the drafter, the Supreme Court of Virginia ruled today in an unpublished order.

A physician signed a three-year contract with an OB/GYN practice in Chesapeake that allowed either the practice or the doctor to terminate the agreement “without cause and without any further obligations upon sixty (60) days advance written notice.”

Another provision in the contract barred an employee from competing with the practice within two years of termination within 20 miles from its office. The provision said the covenant not to compete was severable from any other language in the contract.

The physician gave the 60-day notice near the end of the contract because of medical reasons and then sought a declaratory judgment that it was unenforceable.

The trial judge agreed that it was and the Supreme Court found there was no error in the judgment.

The clause providing for termination of the agreement without cause conflicts with the covenant not to compete, the court said in Greenbrier Obstetrics and Gynecology PC v. Leao, Record No. 080072.

“Here, Greenbrier was the drafter of the agreement. Thus, the ambiguity must be construed against Greenbrier. Applying this principle, we hold that Leao’s sixty days advance written notice terminated the entire agreement which included, and thus terminated, the covenant not to compete.”

By Alan Cooper

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