Omniplex World Services v. U.S. Inv.

• Decision Date: 16 September 2005
• Docket Number: Record No. 042287.
• Citation: Omniplex World Services v. U.S. Inv., 618 S.E.2d 340, 270 Va. 246 (2005)
• Court: Virginia Supreme Court
• Parties: OMNIPLEX WORLD SERVICES CORPORATION v. US INVESTIGATIONS SERVICES, INC., et al.

618 S.E.2d 340

OMNIPLEX WORLD SERVICES CORPORATION v.US INVESTIGATIONS SERVICES, INC., et al.

Record No. 042287.

Supreme Court of Virginia.

September 16, 2005.

Michael J. Lorenger(Stanley J. Brown; Susanne Harris Carnell; Hogan & Hartson, on briefs), McLean, for appellant.

James L. Banks, Jr.(Stephen W. Robinson; Cathryn A. Le, McLean; Jeffrey S. Shapiro, Richmond; McGuireWoods, McLean, on brief), for appellees.

Present: LACY, KEENAN, KOONTZ, KINSER, LEMONS, and AGEE, JJ., and STEPHENSON, S.J.

OPINION BY Justice ELIZABETH B. LACY.

In this appeal, we consider whether the provisions of a non-competition contract are overbroad and unenforceable.

FACTS AND PROCEEDINGS

Omniplex World Services Corporation(Omniplex) is a highly specialized employment agency that provides a variety of security services to government and private sector customers.In August 2003, Omniplex prevailed in its bid to provide staffing for a government agency, referred to as a "Sensitive Government Customer" or "SGC," in a project entitled "Project Eagle."Staffing of this project required that personnel have a "Top-Secret" security clearance validated by the SGC, regardless of the function performed.

At the time Omniplex won the bid, Kathleen M. Schaffer was working on Project Eagle as an employee of MVM, Inc., another staffing company.Upon learning that MVM no longer had the contract to staff Project Eagle, Schaffer sent out applications for employment to various staffing agencies, including The Smith Corporation.Before receiving a response from The Smith Corporation, Schaffer was offered continued employment at Project Eagle by Omniplex.On August 26, 2003, Schaffer signed a one-year employment agreement with Omniplex.The agreement provided for a $2,000 bonus and included a non-competition provision.That provision stated in pertinent part:

Employee hereby covenants and agrees that, immediately following any termination of employment from OMNIPLEX that occurs before the expiration of the Term, . . . Employee shall not for the remainder of the Term (i) accept employment, become employed by, or perform any services for OMNIPLEX's Customer for whom Employee provided services or for any other employer in a position supporting OMNIPLEX's Customer, if the employment or engagement requires Employee to possess the same level of security clearance Employee relied on during his employment with OMNIPLEX, . . . .

Schaffer worked for Omniplex in general administrative security support, monitoring alarms and intrusion detection systems at the SGC's general headquarters, an overt location.

On October 23, 2003, The Smith Corporation responded to Schaffer's earlier employment application and offered her a position as an administrative assistant for the SGC at a covert location.This position required her to arrange travel, including obtaining visas and passports and offered a higher hourly wage than Schaffer was currently earning.Schaffer accepted the offer and, on November 4, 2003, resigned from Omniplex and returned the $2,000 bonus.

Omniplex filed a three-count motion for judgment claiming that Schaffer breached her employment contract, that The Smith Company and U.S. Investigation Services, Inc., the parent company of The Smith Company(collectively "USIS"), tortiously interfered with Schaffer's employment contract, and that Schaffer and USIS engaged in a conspiracy to injure Omniplex's business in violation of Code§ 18.2-499.Omniplex sought injunctive relief and $1,350,000 in damages.The trial court denied Omniplex's motion for a temporary injunction.

Following an ore tenus hearing, the trial court struck Omniplex's evidence, concluding that the non-compete provision of Schaffer's employment agreement was overbroad.Based on this conclusion, the trial court entered an order dismissing all three counts of Omniplex's motion for judgment.We awarded Omniplex an appeal.

DISCUSSION

The standards we apply in reviewing a covenant not to compete are well established.A non-competition agreement between an employer and an employee will be enforced if the contract is narrowly drawn to protect the employer's legitimate business interest, is not unduly burdensome on the employee's ability to earn a living, and is not against public policy.Modern Env'ts, Inc. v. Stinnett,263 Va. 491, 493, 561 S.E.2d 694, 695(2002);Simmons v. Miller,261 Va. 561, 580-81, 544 S.E.2d 666, 678(2001).Because such restrictive covenants are disfavored restraints on trade, the employer bears the burden of proof and any ambiguities in the contract will be construed in favor of the employee.Id. at 581, 544 S.E.2d at 678.Each non-competition agreement must be evaluated on its own merits, balancing the provisions of the contract with the circumstances of the businesses and employees involved.SeeModern Env'ts,263 Va. at 494-95, 561 S.E.2d at 696.Whether the covenant not to compete is enforceable is a question of law which we review de novo.Simmons,261 Va. at 581, 544 S.E.2d at 678;Motion Control Sys., Inc. v. East,262 Va. 33, 37, 546 S.E.2d 424, 426(2001).

These standards have been developed over the years to strike a balance between an employee's right to secure gainful employment and the employer's legitimate interest in protection from competition by a former employee based on the employee's ability to use information or other elements associated with the employee's former employment.Worrie v. Boze,191 Va. 916, 927-28, 62 S.E.2d 876, 882(1951).By its very name, a covenant not to compete is an agreement to prevent an employee from engaging in activities that actually or potentially compete with the employee's former employer.Thus, covenants not to compete have been upheld only when employees are prohibited from competing directly with the former employer or through employment with a direct competitor.CompareMotion Control Sys.,262 Va. at 37-38, 546 S.E.2d at 426(covenant not to compete restricting employment with motor manufacturers that did not manufacture motors similar to employer overbroad because covenant did not protect against competition), and Richardson v. Paxton Co.,203 Va. 790, 795, 127 S.E.2d 113, 117(1962)(covenant not to compete that restricted former employee, who sold specific supplies and services, from working for any employer involved with any kind of supplies, equipment, or services in the same industry overbroad because covenant encompassed business for which employer did not compete), with Blue Ridge Anesthesia and Critical Care, Inc. v. Gidick,239 Va. 369, 373, 389 S.E.2d 467, 469(1990)(non-competition agreement reasonable because restriction protected against direct competition by prohibiting former employees from employment with another company in a position selling similar medical equipment to that sold by former employer), and Roanoke Eng'g Sales Co. v. Rosenbaum,223 Va. 548, 553, 290 S.E.2d 882, 885(1982)(non-competition covenant reasonable because employment restriction limited to activities similar to business conducted by former employer).The restriction in this case is not limited to positions competitive with Omniplex.

Under the provision at issue, Schaffer is prohibited from performing "any services . . . for any other employer in a position supporting OMNIPLEX's Customer."^*(Emphasis added.)This provision precludes Schaffer from working for any business that provides support of any kind to the SGC, not only security staffing businesses that were in competition with Omniplex.Thus, for example, the non-competition agreement precludes Schaffer from working as a delivery person for a vendor which delivers materials to the SGC if such security clearance was required to enter an SGC installation even though the vendor was not a staffing service competing with Omniplex.Because the prohibition in this non-competition provision is not limited to employment that would be in competition with Omniplex, the covenant is overbroad and unenforceable.Motion Control Sys.,262 Va. at 37-38, 546 S.E.2d at 426;Richardson,203 Va. at 795, 127 S.E.2d at 117.

Accordingly, for the reasons stated, we will affirm the judgment of the trial court.

Affirmed.

Justice AGEE, with whom Justice KEENAN and Justice KINSER join, dissenting.

The trial court found that the restrictive covenant at issue in this case was overly broad because it had no geographic specification, in effect a worldwide covenant.¹Not commenting on the trial court's rationale, the majority holds that the covenant is unreasonable because it does not limit the prohibited positions to those of direct competition.Under the specific facts of this case, I cannot agree with either view and therefore respectfully dissent.

The majority cites Motion Control Systems, Inc. v. East,262 Va. 33, 37-38, 546 S.E.2d 424, 426(2001), andRichardson v. Paxton Co.,203 Va. 790, 795, 127 S.E.2d 113, 117(1962), to support its holding that the noncompete provision is overbroad because the contract restriction is not limited to employment that would be in competition with Omniplex.Neither of these cases, or any others, however, establish a rule that noncompete provisions are per se unenforceable if they fail to limit the restriction to those positions in direct competition with the former employer.Rather, in each case we held that under the facts of that case, the restrictive covenant at issue "imposed restraints that exceeded those necessary to protect [the former employer's] legitimate business interests."Motion Control,262 Va. at 38, 546 S.E.2d at 426.See alsoRichardson,203 Va. at 795, 127 S.E.2d at 117("Such restraint is unreasonable in that it is greater than is necessary to protect Paxton in his legitimate business interest, and it is unreasonable from the standpoint of Richardson because it is unduly harsh on him in curtailing his legitimate efforts to earn a livelihood.Thus it cannot be enforced.").

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