Is your non-compete enforceable?

Don’t take this as sound legal counsel, but based on my research, non-competes are not easy to enforce, especially in the DC metropolitan area. Courts generally frown on agreements that hurt a person’s ability to make a living.

As a rule of thumb, non-compete agreements are not enforceable if they are overly broad. For example, in a 2016 court case, RLM Commc’ns, Inc., v. Tuschen, the plaintiff (RLM) sued their former employee, Amy Tuschen, for taking a job with a competitor after they found out that company was competing for a government contract they were pursuing.

There were claims in addition to the violation of the non-compete. All were dismissed. The noncompete was dismissed specifically because it was overly broad. The non-compete clause read as follows:

“While I, the Employee, am employed by Employer, or for 1 years/months afterward, I will not directly or indirectly participate in a business that is similar to a business now or later operated by Employer in the same geographical area.

This includes participating in my own business or as a co-owner, director, officer, consultant, independent contractor, employee, or agent of another business.”

The court concluded that it could be read in such a way that prevented Tuschen from working even in a job that was unrelated to the core business of Tuschen and thus, was invalid.

Now, in another case in Virginia, Preferred Sys. Solutions, Inc. v. GP Consulting, LLC, the court ruled that the non-compete was indeed valid and forced the defendant to compensate the plaintiff for lost business.

This is an interesting case because the plaintiff was a sole-proprietor LLC (what you will be as a 1099) who agreed to provide 1099 sub-contractors services (smart man!) to the prime (Preferred Systems Solutions) on a Defense Logistics Agency (DLA) contract.

GP Consulting signed a non-compete agreement that stated:

During the term of this Agreement and for a period of twelve (12) months thereafter, GP hereby covenants and agrees that they will not, either directly or indirectly:

(a) enter into a contract as a subcontractor with Accenture, LLP, and or DLA to provide the same or similar support that Preferred is providing to Accenture, LLP and/or DLA and in support of DLA Business Systems Modernization program.

(b) enter into a agreement with a competing business and provide the same or similar support that Preferred is providing to Accenture, LLP and/or DLA and in support the DLA Business Systems Modernization program.

Basically, the only restriction here was the 1099 couldn’t work for another prime contractor on the same contract vehicle for another year. Pretty specific!

Guess what the guy did. He went to work for Accenture on the same contract doing the exact same work.

This case went to the Virginia Supreme Court and they ruled that because the plaintiff wasn’t unduly restricted in finding other employment on a different contract in his field and the non-compete was very specific, he was liable for lost profits.

Every non-compete is different but if it’s overly broad, it’s likely not enforceable. If it’s very specific and doesn’t hurt your ability to find work in the same field or industry, you probably need to adhere to its terms.

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If you have questions feel free to reach out to me directly at dale@1099fedhub.com. I can also add you to my informal mailing list in case I have updates or news or whatever.

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This article is an excerpt from Chapter 4 (Is your non-compete enforceable?) of my book.

You can read more about it here:

Going 1099: How to become a solo federal sub-contractor and gain control of your working life, earn more money and unlock more free time