HOME PARAMOUNT PEST CONTROL v. Shaffer
33 I.E.R. Cas. (BNA) 46, 718 S.E.2d 762, 282 Va. 412 (2011)
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Rule of Law:
A non-compete provision that prohibits a former employee from working for a competitor in any capacity is an overbroad and unenforceable restraint on trade unless the employer can prove a legitimate business interest for such a sweeping prohibition.
Facts:
- Justin Shaffer was an employee of Home Paramount Pest Control Companies, Inc. ('Home Paramount').
- In January 2009, Shaffer signed an employment agreement containing a non-compete provision.
- The provision prohibited Shaffer from engaging 'directly or indirectly or concern[ing] himself/herself in any manner whatsoever' in the pest control business for two years after termination.
- The restriction applied to any role, including owner, agent, employee, partner, officer, director, or stockholder.
- In July 2009, Shaffer resigned from Home Paramount.
- Shortly after his resignation, and within the two-year restricted period, Shaffer began working for a competitor, Connor's Termite and Pest Control, Inc.
Procedural Posture:
- Home Paramount filed a complaint in a Virginia circuit court (the trial court) against Justin Shaffer for breach of contract and Connor's Termite and Pest Control for tortious interference with contract.
- The defendants filed a plea in bar, arguing that the non-compete provision was overbroad and unenforceable.
- Following an evidentiary hearing, the circuit court granted the defendants' plea in bar and dismissed the relevant counts of the complaint.
- Home Paramount (as appellant) appealed the circuit court's judgment to the Supreme Court of Virginia.
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Issue:
Does a non-compete provision in an employment agreement that prohibits a former employee from engaging 'in any manner whatsoever' in the employer's industry constitute an unenforceable overbroad restraint on trade?
Opinions:
Majority - Justice Mims
Yes, a non-compete provision that prohibits a former employee from engaging 'in any manner whatsoever' in the employer's industry is an unenforceable overbroad restraint on trade. A provision is enforceable only if it is narrowly drawn to protect the employer's legitimate business interests, is not unduly burdensome on the employee, and is not against public policy. This provision's functional restriction is overbroad because it prohibits Shaffer from working for a competitor in any capacity, even in roles that do not compete with Home Paramount, such as a bookkeeper or janitor. Citing cases like Simmons and Motion Control, the court found that a blanket prohibition on working for a competitor is impermissible without proof of a legitimate business interest justifying such a broad scope. The court explicitly overruled its 1989 decision in Paramount Termite Control Co. v. Rector, which had upheld identical language, stating that the law in this area has evolved and been clarified in the intervening years. The overbreadth of the functional restriction cannot be saved by reasonable geographic or temporal limits.
Dissenting - Justice McClanahan
No, the non-compete provision is not an unenforceable restraint on trade and should be upheld. The majority's decision to overrule Paramount Termite Control Co. v. Rector violates the principle of stare decisis. In that 1989 case, the Court upheld the identical non-compete language involving the same company. Home Paramount was justified in relying on this established precedent when ordering its business affairs. Overruling prior decisions creates instability in the law and undermines the public's ability to know their legal rights and obligations with certainty.
Analysis:
This decision significantly clarifies Virginia's jurisprudence on non-compete agreements, marking a definitive shift toward stricter scrutiny of functional restrictions. By explicitly overruling the 22-year-old precedent of Paramount Termite, the court signals that it will no longer enforce clauses that prohibit employment in 'any capacity' with a competitor. This ruling requires employers to draft non-competes with greater precision, limiting restrictions to the specific job functions or activities that genuinely threaten a legitimate business interest. The case solidifies a line of modern Virginia cases that disfavor broad, anti-competitive restrictions on an individual's ability to earn a living.
