Blue Ridge Anesthesia & Critical Care, Inc. v. Gidick

Supreme Court of Virginia · Contracts

ContractsNon-competition agreementsRestrictive covenantsnon-competerestrictive covenantemployment contractreasonablenessgeographic scope

Facts

Blue Ridge sold anesthesia and critical care equipment in a highly competitive market and hired Gidick, Ward, and Faupel under employment contracts containing a three-year non-competition agreement. The covenant barred each employee, after 90 days of employment, from opening, working for, or acting on behalf of a competitor rendering the same or similar services within the territories serviced by that employee, but did not preclude work in the medical industry in a non-competing role. During employment, Gidick worked only as a salesman, while Ward and Faupel were primarily servicemen who sometimes engaged in sales, and all had customer contact in their territories. After leaving Blue Ridge, Gidick began selling the same type of equipment in his former territory, and Ward and Faupel joined Sarah Medical, a company formed by Gidick.

Issue

Whether the employees' non-competition agreement was valid and enforceable. More specifically, the question was whether the covenant was reasonable as to Blue Ridge's legitimate business interests, the employees' ability to earn a livelihood, and public policy.

Rule

An employer-employee non-competition agreement is valid if, in light of the facts of the case, the restraint is no greater than necessary to protect the employer's legitimate business interest, is not unduly harsh and oppressive in curtailing the employee's legitimate efforts to earn a livelihood, and is reasonable from the standpoint of sound public policy. Such agreements may be justified by employee contact with customers even if the employee did not possess confidential information or trade secrets.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Piedmont Respiratory Systems, a fictional medical-device distributor in Richmond, employed Lena Ortiz to service and occasionally sell ventilator accessories to hospitals in eastern Virginia. Her contract barred her for three years from working for a competitor providing the same or similar services within the territory she had serviced, but allowed her to work in the medical industry in a noncompeting role. After resigning, Lena joined a rival and began calling on the same hospitals in eastern Virginia.

If Lena argues the covenant is unenforceable because she never handled trade secrets or confidential pricing data, what is the strongest response?

Explanation. The majority held that an employer need not show the employee possessed confidential information or trade secrets. Customer contact alone may justify a noncompetition covenant where, in a competitive market, those relationships could adversely affect the employer’s ongoing business. Here, Lena had direct contact with the employer’s customers in her serviced territory, so the employer has a legitimate business interest. (Derived from Blue Ridge Anesthesia & Critical Care, Inc. v. Gidick (n.d.).)