Damages for Breach of a Non-Compete in Virginia

When an employee breaches a valid non-compete contract, the employer is entitled to damages and other relief.

Employers have several options: preliminary injunction, permanent injunction, lost profits, liquidated damages, and attorneys’ fees.

Here is a summary of the damages that an employer is allowed to recover under Virginia law in non-compete cases.

Preliminary Injunction

What is a preliminary injunction?

A preliminary injunction is a court order that temporarily restrains the employee from violating the contract while a lawsuit is pending.

When can a party get a preliminary injunction?

The time to ask for a preliminary injunction is shortly after the lawsuit is filed. The employer can schedule a hearing to ask the court to enter an order to enforce the contract prior to trial.

What must an employer prove to get a preliminary injunction?

The employer must prove a likelihood of success on the merits and imminent harm if the injunction is not granted.

Permanent Injunction

What is a permanent injunction?

A permanent injunction is a court order that permanently restrains the employee from engaging in the activities prohibited by the non-compete contract.

When can an employer get a permanent injunction?

Unlike a temporary injunction, which is granted at the beginning of a lawsuit, a permanent injunction is granted at the conclusion of the lawsuit as part of the court’s final judgment.

Lost Profits

What are lost profit damages?

An award of lost profits is allowed if the employee’s breach of the non-compete contract causes the employer to lose future revenue that the employer was reasonably certain to receive, absent the employee’s conduct. Preferred Systems Solutions, Inc. v. GP Consulting, LLC284 Va. 382, 398-400 (2012).

What must an employer prove to get lost profits in Virginia?

An employer can present evidence in the form of receipts, invoices, and testimony to show that:

  • It had a past history of billing for work to a customer; 
  • It was likely to continue billing for the work; and
  • After the employee began competing, the employer stopped receiving revenue for the work at the same time that the competitor billed for similar work.

Liquidated Damages

What are liquidated damages?

An award of liquidated damages is allowed if the parties agree in advance on the amount of money to be paid as compensation for loss or injury that may result from a breach of the non-compete contract.

What is an example of a liquidated damages clause?

A non-compete contract might state, “In the event employee breaches the non-compete contract, the employer shall be entitled to an award of $15,000 per month for every month that the employee breaches the contract.”

Are liquidated damages clauses enforced in Virginia?

A liquidated damages clause is considered reasonable and enforceable under Virginia law if “the damage resulting from the breach of contract is susceptible of definite measurement, or where the stipulated amount would be grossly in excess of actual damages.” Brooks v. Bankson, 248 Va. 197, 208 (1994).

Are liquidated damages enforceable when the employer has suffered lost profits?

In non-compete disputes, Virginia trial courts generally do not enforce liquidated damages clauses because the employer has often suffered actual damages due to lost profits that render liquidated damages invalid and unnecessary. See, e.g., Pace v. Ret. Plan Admin Serv., 74 Va. Cir. 201, 203 (Richmond Cir. Ct. 2007) (holding that a liquidated damages clause is contrary to public policy and unenforceable in a non-compete dispute).

Attorneys’ Fees and Costs

What are attorneys’ fees and costs?

An award of attorneys’ fees and costs is allowed when the parties have agreed to pay the fees and costs associated with enforcing the contract to the prevailing party. Sometimes, the fees provision is one-sided, whereby only the employer can recover its fees and costs from the employee if the employer successfully enforces the non-compete. Other times, the fees provision is mutual, whereby the prevailing party can recover its fees and costs from the losing side.

Summary: An experienced non-compete lawyer can help employers and employees understand the potential financial consequences of breaching a non-compete contract under Virginia law.