Facts
- Omniplex provided security-related staffing services and won a government staffing contract (“Project Eagle”) requiring a top-secret clearance validated by the government customer.
- Kathleen M. Schaffer, previously on the project through another staffing firm, accepted Omniplex’s offer and signed a one-year employment agreement with a $2,000 bonus and a non-competition covenant.
- The covenant barred Schaffer, if she left before the one-year term ended, from working for the same customer or “any other employer in a position supporting” that customer if the job required the same level of security clearance she used at Omniplex.
- Schaffer performed general administrative security support at the customer’s overt headquarters.
- Another staffing company (The Smith Corporation, whose parent was USIS) later offered Schaffer a higher-paying administrative assistant position for the same customer at a covert location.
- Schaffer resigned from Omniplex less than three months into the term, returned the bonus, and accepted the new position.
- Omniplex claimed the move violated the non-competition covenant and that USIS/Smith induced the breach.
Issues
- Whether the non-competition covenant was overbroad and unenforceable under Virginia law because it restricted employment beyond direct competition with the employer.
- Whether an overbroad covenant barred Omniplex’s related claims for tortious interference and conspiracy premised on the alleged breach.
Decision
- The Supreme Court of Virginia affirmed the circuit court’s dismissal of Omniplex’s action.
- The Court held the non-competition covenant was overbroad and unenforceable because it prohibited Schaffer from working for any employer supporting the same government customer whenever the job required the same clearance, regardless of whether the work competed with Omniplex.
- Because the covenant was unenforceable as written, Omniplex could not proceed on claims dependent on that restriction.
- The Court declined to modify the covenant to make it reasonable.
Legal Principles
- Non-competition covenants in Virginia are disfavored restraints on trade and are enforceable only if they are (1) narrowly drawn to protect the employer’s legitimate business interests, (2) not unduly burdensome on the employee’s ability to earn a living, and (3) consistent with public policy.
- The employer bears the burden of proving reasonableness, and ambiguities are construed strictly against the employer as drafter.
- A restriction that bars a former employee from performing services for a customer or within a field without tying the prohibition to activities in direct competition with the employer is overbroad.
- Functional overbreadth can invalidate a covenant even when the time period is limited, particularly when the restriction effectively prevents the employee from using a credential (such as a security clearance) in non-competitive roles.
- Virginia courts will not “blue pencil” or rewrite an unreasonable covenant; an overbroad noncompete is unenforceable as drafted.
Conclusion
The court held Omniplex’s clearance-based noncompete unenforceable because it swept beyond competitive activity and broadly barred employment supporting the same government customer; as a result, the suit based on that covenant was dismissed and the courts would not revise the agreement to save it.