Coming on the heels of a series of decisions narrowing the permissible scope of enforceable restrictive covenants, the Virginia Supreme Court's most recent decision in Assurance Data, Inc. v. Malyevac, Record No. 121989 (Sep. 12, 2013), at least offers a procedural break for employers facing a challenge to the enforceability of their restrictive covenants. On September 12, 2013, the Virginia Supreme Court held that a Circuit Court may not decide the enforceability of a restrictive covenant as a matter of law without first permitting an employer to present evidence that the restraint is "reasonable under the particular circumstances of the case." Assurance Data, Inc. v. Malyevac, Record No. 121989 (Sep. 12, 2013). In reaching its holding, the Court noted that "restraints on competition are neither enforceable nor unenforceable in a factual vacuum." As result, employees must proceed to an evidentiary hearing in most (if not all) cases in order to challenge the enforceability of a restrictive covenant. In a state in which restrictive covenants have, historically, been widely disfavored, this opinion represents some good news for employers seeking to avoid invalidation of their restrictive covenants. Even in a case where a restrictive covenant appears overly broad on its face, the process of challenging it will be more expensive and time consuming for the employee. However, this case is not all good news for employers. This opinion also makes it unlikely that employers filing declaratory judgment actions on the enforceability of their restrictive covenants will obtain affirmative relief on summary judgment without an evidentiary hearing first. But, given that summary judgment is so rarely granted in Virginia anyway, this opinion likely will not mark too a significant change on employers' litigation strategies in their enforcement actions.
This article is presented for informational purposes only and is not intended to constitute legal advice.
