by Chap Petersen

In the 2020 legislative session, the General Assembly – with a new Democratic majority – passed A LOT of bills regarding labor rights. One of the most important and least noticed was SB 840, which protected “low wage” workers, i.e. those making under the average state wage, from being subject to “covenants not to compete.”

The definition of “covenant not to compete” was broad:

“A covenant or agreement between an employer or employee that restrains, prohibits or otherwise restricts an individual’s ability, following the termination of the individual’s employment, to compete with his former employer.”

The purpose of the bill was to make sure that lower-level service workers were not tied down by onerous post-employment restrictions, but could start their own business or work for a competitor without fear. The only restriction was laid out in Section C of the bill, which preserved non-disclosure agreements relating to confidential information.

It was an excellent idea. (The sponsor btw was Bill DeSteph, R-VA Beach). I liked it so much I added a floor amendment that employees who successfully enforced the law would be entitled to attorney fees.

Three years later, I found myself representing a worker in a security firm making $50,000 a year. He judged (correctly) that he could do a better job on his own. He started a company and was immediately served with a 50-page, 10-count lawsuit by his former employer and its Big Law Firm, which sought to shut him down via a non-compete agreement.

My firm  moved to void the non-compete as a violation of Virginia’s “low wage worker” law. We won at the trial court level, which caused Big Law to file an “interlocutory appeal.”  

The matter was briefed and argued, then nothing happened for several months.

On Tuesday, January 27, the Court of Appeals released its opinion. In doing so, it turned the whole statute upside-down.

The Court ruled that the protections in the first paragraph of the statute was undone by a later sentence in the law which stated generally that a “covenant not to compete” could not be applied to former employees — low-wage or not — who did not initiate the contact with former clients.

Somehow, this pro-freedom  language was twisted to “legalize” restrictive clauses against low-wage workers – despite the fact that the law plainly says “no restriction” applies.

In the body of its opinion, the Court of Appeals relied on several Latin aphorisms to justify its decision. (Why refer to the text in plain English, when you can reference Latin?).

The precedent is truly awful: under this interpretation, service-level employees from waiters to car salesmen can be bound by non-competes, crippling their chance to open a small business. That’s not America.

Fortunately, our client has a right of appeal to the Virginia Supreme Court. We’ll pursue that but it’s a lot of extra work. Ugh.

This is my third trial court reversal by the Court of Appeals in the past nine months.

Chap Petersen lives and practices law in Northern Virginia. This column is republished with permission from his “The Virginia Attorney” newsletter.