The Virginia Business Litigation Blog
Restrictive covenants in employment agreements (like non-compete and non-soliciation provisions) are disfavored in Virginia and only enforced when narrowly crafted so that the restrictions are no broader than necessary to protect the employer’s legitimate business interests. Even when the contract is well written and enforceable, however, there’s no guarantee the employer will be able to obtain an injunction to prevent a former employee from violating its terms. Injunctive relief is considered an “extraordinary” remedy in Virginia and is never automatic. I highlighted a Fairfax County case illustrating this principle a few years ago. Today, let’s examine how the Eastern District of Virginia ruled when presented with a similar scenario.
The basic facts of Tactical Rehabilitation, Inc. v. Youssef go like this: Tactical Rehabilitation, a Florida-based company selling durable medical equipment, employed Alaina Youssef under an agreement that included non-compete, non-solicitation, and confidentiality clauses. After Youssef’s termination, Tactical alleged that she breached these agreements by soliciting its clients and diverting business to her new employer, a direct competitor. Tactical sought injunctive relief to prevent Youssef from continuing these activities, citing significant revenue losses and harm to its business relationships.
After a combined hearing on the defendants’ motion to dismiss and the plaintiff’s motion for a preliminary injunction, the court found that the noncompete language was overly broad and therefore unenforceable. The non-solicitation language, on the other hand, was upheld as narrowly drafted and reasonable. Despite this finding, the court denied the company’s request for injunctive relief, illustrating that enforceability and
entitlement to injunctive relief are distinct issues.
The non-solicitation clause in Youssef’s agreement prohibited her only from soliciting Tactical’s clients for the benefit of a competitor. (It read, “Nor shall [Youssef] solicit any client of [Tactical] for the benefit of a third party that is engaged in a similar business to that of [Tactical].”) The court found that this clause was properly limited in scope, function, and duration, and that it was narrowly tailored to protect legitimate business interests without unduly restricting Youssef’s ability to earn a living. (The noncompete provisions in her contract, on the other hand, were found to be overly broad in that they barred Youssef from engaging in “similar business practices” or working for a competitor in any capacity.)
To determine whether to grant the requested injunctive relief, the court applied the well-established four-part test from Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 20 (2008), which requires a requesting party to show:
- A likelihood of success on the merits;
- Likely irreparable harm in the absence of injunctive relief;
- That the balance of equities tips in its favor; and
- That an injunction is in the public interest.
While Tactical succeeded in convincing the court of a likelihood of success on its claim that the non-solicitation clause was enforceable, it stumbled on the remaining factors, particularly irreparable harm. “Although Tactical has demonstrated some likelihood of success in enforcing the non-solicitation provision…, any harm resulting from such breach would not result in irreparable harm at this stage of the proceedings,” the court wrote.
First, irreparable harm must be “actual or imminent,” not remote or speculative. (See Di Biase v. SPX Corp., 872 F.3d 224, 230 (4th Cir. 2017)). Tactical pointed to declining sales and lost client relationships, but the court found these alleged harms to be merely speculative without clear evidence linking them directly to Youssef’s actions.
Next, the court emphasized that Tactical’s alleged harm—lost business and diminished sales—could be adequately remedied through monetary damages. Even if Tactical could prove these losses at trial, it failed to convince the court that these losses could not be quantified and recovered through monetary damages. There court therefore denied the motion for a preliminary injunction.
The court’s decision highlights the high bar businesses must clear to obtain preliminary injunctions, even when their contractual provisions withstand scrutiny.