On March 16, 2015, Mark Krudys filed an appeal with the Fourth Circuit Court of Appeals concerning an inmate who was imprisoned in a Virginia jail for three months beyond his sentence.
On January 25, 2015, Mark Krudys gave a presentation to the Stafford County Chapter of the NAACP. Mark was invited by the NAACP to address current civil rights issues. Mark addressed the following topics:
- prisoner death cases,
- police shootings,
- sentencing guidelines,
- the high incarceration rate in the U.S.,
- the effects of fines and courts costs on the poor,
- the chilling effect of the police at polling stations,
- juvenile justice issues,
- school searches, and
- how criminal records thwart people from obtaining employment and possible solutions to the problems.
Over 75 persons and the media attended the gathering. Law enforcement officers from Stafford and Spotsylvania counties also made presentations.
Recently, Mark Krudys has worked to advance inmates’ civil rights claims:
- On August 13, 2014, Mark Krudys led a nationally broadcast webinar entitled, “Jail and Jailer Liability: The Trial of a Jail Death Case.” The course covered both practical and substantive aspects of inmate death cases. The course covered the preliminary steps an attorney must take to initiate the case, discussed the cause of death’s impact on the case, considered who to name as a defendant, and provided information on discovery, experts, jury selection, and trial strategy. Substantively, the course provided an overview of the relevant law under 42 U.S.C. § 1983 and outlined the requirements for successful civil rights claim under this section. It covered choice of forum, subject matter jurisdiction, limitations of liability, immunity, standards for culpability, statutes of limitations, and fee shifting. Example materials provided included previously filed complaints, document requests, jail inspection requests, responses to motions to dismiss and summary judgment motions, and voir dire questions.
- In the next edition of the Virginia Trial Lawyers’ Association Journal, Mark Krudys will publish an article entitled, “Death or Personal Injury of an Inmate: Is a State Claim or a Federal Civil Rights Claim Under 42 U.S.C. § 1983 the Better Route to Recovery?”
- Mark Krudys, along with Charlottesville attorney Kyle McNew, recently drafted the Virginia Trial Lawyers’ Association’s amicus curiae in Suzanne Boren v. Northwestern Regional Jail Authority, concerning whether Virginia regional jail authorities are entitled to sovereign immunity.
Attorneys should be aware that they risk waiving attorney-client privilege by asserting an advice of counsel affirmative defense. In an antitrust litigation, the U.S. District Court for the District of Idaho recently granted plaintiffs’ motion to compel certain defendants to produce documents identified on their privilege logs because they had waived attorney-client privilege by asserting an affirmative defense that they acted in on the advice of counsel.
In civil litigation, parties often create “privilege logs” describing documents or other items they have withheld from discovery because they are privileged, for example by the attorney-client privilege, or because they fall under the work product doctrine. Under Rule 26(b)(5) of the Federal Rules of Civil Procedure:
When a party withholds information otherwise discoverable by claiming that the information is privileged . . . the party must . . . describe the nature of the documents, communications, or tangible things not produced or disclosed—and do so in a manner that, without revealing information itself privileged or protected, will enable other parties to assess the claim.
The party asserting the privilege has the burden of proving it. Tornay v. U.S., 840 F.2d 1424, 1426 (9th Cir. 1988). To establish that documents are protected by the attorney-client privilege, the party asserting the privilege must prove each element of the following eight-part test:
- Where legal advice of any kind is sought;
- from a professional legal adviser in his capacity as such;
- the communications relating to that purpose;
- made in confidence;
- by the client;
- are at his instance permanently protected;
- from disclosure by himself or by the legal adviser;
- unless the protection be waived.
In re Grand Jury Investigation, 974 F.2d 1068, 1071 n.2 (9th Cir. 1992).
In In re Fresh & Process Potatoes Antitrust Litig., 2014 U.S. Dist. LEXIS 50828 (D. Idaho Apr. 11, 2014), the plaintiffs claimed that the eighth element of the test applied—that the privilege had been waived—and that the defendants were required to produce the documents for which it was waived in discovery. The plaintiffs moved to compel production of certain documents listed on the defendants’ privilege logs, asserting that, among other things, privilege had been waived through certain defendants’ assertion of the affirmative defense that they acted in reliance on advice of counsel. Id. at *16.
In this antitrust case, certain defendants asserted that they had a good faith belief their conduct was permissible under federal antitrust law and the Capper-Volstead Act (a law that lists permissible collective conduct that does not risk antitrust liability) based upon their counsel’s advice. Id. at *20. The defendants argued that this affirmative defense waived the attorney-client privilege for documents and information relating only to the defendants’ belief in the legality of the precise conduct that the plaintiffs challenged. Id. at *21. Conversely, the plaintiffs argued that the affirmative defense waived the attorney-client privilege for a wide range of topics. Id. at 23. The Court agreed with the plaintiffs, particularly because the parties had previously agreed to a privilege waiver stipulation that was not as “narrowly tailored” as the defendants claimed it to be. Id. at *24-26.
The Court reasoned that a party asserting a defense of advice of counsel should be required to produce all documents relied upon or considered by counsel in forming its advice, otherwise, “a litigant may use the attorney-client privilege as a shield, and deprive the opposing party of the opportunity to test the legitimacy of the defendant’s claim.” Id. at *28 (citing Aspex Eyeware, Inc. v. E’lite Optik, Inc., 276 F. Supp. 2d 1084, 1092 (D. Nev. 2003)). The Court stated that, “[t]o hold otherwise would . . . deprive Plaintiffs of the broader context in which the advice was given.” Id. at *31. The Court elaborated:
It would be patently unfair for a party to assert that they relied upon the advice of counsel, yet deprive the opponent of the opportunity to understand why the advice was given, what other alternatives were looked at, why certain advice was rejected, and how the advice was interrelated to other business decisions. . . . Plaintiffs are entitled to understand and ask questions about the validity of counsel’s advice, and Defendants may not use the assertion of the privilege both ‘as a sword and a shield.’
Id. at *31-32 (citing Gorzegno v. Maguire, 62 F.R.D. 617, 621 (S.D.N.Y. 1973).
As a result, defendants should be cautious in asserting an advice of counsel affirmative defense because they could waive attorney-client privilege across the board. On the other hand, plaintiffs should be aware that they are entitled to obtain broad discovery when defendants assert this affirmative defense.
In a recent New York Times article, certain investors who failed to prevail on their claims against their broker complained about the arbitration panel’s actions at the hearing. Specifically, arbitrators struggling to stay awake or being heard laughing about the facts of the case.
In response to numerous investor complaints, the Financial Industry Regulatory Authority (FINRA), Wall Street’s self-regulatory organization, announced last week the formation of a 13-member task force to consider possible enhancements to its arbitration process to improve the transparency, impartiality and efficiency.
The FINRA system has been criticized for a pro-industry bias, lack of transparency, and inefficiency. Arbitration is typically mandatory in cases where customers feel a broker is responsible for investment losses. Participants are denied their right to trial in a court of law, and instead have their dispute resolved by an arbitrator, a generally impartial person who is knowledgeable about the areas of controversy.
Arbitration has its pros and cons, and investors are often surprised at how the process works. Arbitration is considered an “equitable forum,” for instance, which means arbitrators don’t have to strictly apply the law. “The court applies the law to the facts and makes a decision,” said Jonathan Morris, chief legal officer at Dynasty Financial, who has served as an arbitrator. “In arbitration, they might not rule all for one side or another. The investor can be partially right and partially at fault and arbitrators can split the difference.” And, almost always, courts decline to reverse an arbitration panel’s award. On the other hand, some legal experts argue that some states’ laws are not investor-friendly, meaning that many investors wouldn’t have a chance to be heard if it weren’t for arbitration. Also, arbitration is generally faster and cheaper than going to court.
The group of public advocates, securities lawyers, and industry executives is expected to come together for the first time in late September or early October, decide what issues to focus on, and wrap up recommendations of how to better protect investors and their shaken confidence in capital markets within one year. As the New York Times article concludes, perhaps the FINRA task force might start with figuring out ways to make the process more equitable for small investors, for whom every last dollar counts.
- Taking a Broker to Arbitration – New York Times, July 18, 2014
- Advocates, Industry Execs to Probe FINRA Arbitration System – Wall Street Journal, July 17, 2014
- FINRA Press Release – July 17, 2014
- FINRA’s Dispute Resolution Process
- Arbitration Overview – National Arbitration Forum
A company hires a software engineer, or a stock broker, or perhaps a bio-chemist. This company, knowing the newly hired employee could in the future use his or her knowledge against them, requires the employee to sign a contract agreeing not to look for a job at a rival company for a set period of time. This type of agreement is known as a non-compete clause. These are clauses in contracts which prevent a company’s rival from “poaching” their employees. Employers argue that these agreements are necessary in the world of high-tech and highly skilled jobs, where intellectual property and know-how means everything. Interestingly, there has been an increasing trend of inserting these agreements into the contracts of jobs that have traditionally not included them, many times unbeknownst to the future employee.
Take Colette Buser of Boston, Massachusetts, a 19-year-old college student searching for a summer job. As reported by the New York Times, Colette had worked the previous three summers as a camp counselor in the nearby town of Wellesley. The camp where she worked for all three summers is owned and operated by the Linx Company. According to Linx’s website, they have “over 30 premier camps” in the Wellesley area; one could say they have captured the summer camp market in Wellesley. When Colette applied to work at a different camp this summer, she was surprised when the camp turned her down. Not known to Ms. Buser, her previous contract with Linx included a non-compete clause forbidding her from seeking employment from a non Linx owned camp within a 10 mile radius, for an entire year. The year-long ban may seem somewhat harsh, but the 10 mile radius stipulation is rather draconian for a young college student with limited means. As it was with Colette and her family, this probably seems rather bizarre to most people. How could a rival summer camp threaten Linx by hiring one of their former employees? Colette’s story is not unique, non-compete clauses are now increasingly being used in all manners of jobs that have traditionally not included any, and like camp counselors, many of these jobs do not require much technical skill (if any). This begs the question: do companies own the products of their employee’s labors, or do they in fact own the actual talent of their employees?
The owner of Linx, John Kahn, defends the non-compete clauses in his company’s contracts, “Our intellectual property is the training and fostering of our counselors, which makes for our unique environment,” he said. “It’s much like a tech firm with designers who developed chips.” Mr. Kahn’s statements are not only a bit far-fetched, but many believe the reasoning behind supporting non-compete clauses for all manners of jobs may be flawed, as well. According to Massachusetts State Representative Lori Ehrlich, these clauses possibly contribute to a moribund economy and halt innovation. Both Massachusetts and California have a large tech industry sector of their economies. For many years now, the tech industry in Silicon Valley, California has continued to grow at an astronomical rate, while in Massachusetts it has grown at a much slower pace and has stagnated at times. Certainly there are many factors contributing to this discrepancy, but it is impossible to ignore that California bans non-compete clauses (except in very special situations), while Massachusetts does not. California does however have a much higher unemployment rate than Massachusetts, so this may be an aberration.
Virginia courts strongly disfavor restraints on trade. Virginia Law further require that “non-competition clauses be strictly construed against the employer” (Roto Die Co. v. Lesser, 899 F. Supp. 1515, 1519 (W.D. Va. 1995) (citing Grant v. Carotek, Inc., 737 F. 2d 410,411 (4th Cir. 1984)(emphasis added)) and that ambiguities in the contract [be] construed in favor of the employee” (Omniplex World Servs. V. U.S. Investigations Servs., 270 Va. 246,249 (Va. 2005) (citing Simmons v. Miller, 261 Va. 561, 580-81 (Va. 2001)). The Supreme Court of Virginia holds restrictive covenants unenforceable when the prohibited competition is “too indirect and tenuous” (Preferred Systems Solutions, Inc. v. GP Consulting, LLC, 284 Va. 382, 393 (Va. 2012).
When determining whether a restrictive covenant is valid, the Virginia Supreme Court considers the function, geographic scope, and duration of the restriction as a whole (Home Paramount Pest Control Companies, Inc. v. Justin Shaffer, et al., 282 Va. 412, 415 (Va. 2011) (citing Simmons v. Miller, 261 Va. 561, 581, (Va. 2001)). Thus, a non-compete provision is not enforceable unless it 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 (Omniplex, 270 Va. at 249). Conversely, the Supreme Court of Virginia has upheld contracts not to compete only if they are sufficiently “narrowly drawn” to prevent only direct competition with the employer by the former employee. For example, in Preferred Systems Solutions, Inc. v. GP Consulting, LLC, the court enforced a non-compete clause that proscribed work on one specific project, for only two specific companies, and was limited to only 12 months (284 Va. 382,393 (Va. 2012)).
In May 2014, the Financial Industry Regulatory Authority (FINRA) fined the bank Morgan Stanley Smith Barney LLC $ 5 million for supervisory failures related to the way its brokers solicited investments in certain initial public offerings (IPOs). Between February 2012 and May 2013, Morgan Stanley Smith Barney LLC sold shares of 83 IPOs to retail customers without adequate procedures and training to make sure that its sales staff properly distinguished between “indications of interest” and “conditional offers” when they solicited investors. The affected IPOs include Facebook and Yelp. When Morgan Stanley Smith Barney LLC settled the matter with FINRA and agreed to the $5 million fine, it did not admit or deny the charges, but it consented to the entry of FINRA’s findings.
As the Wall Street Journal’s Market Watch reports, before the effective date of an IPO registration statement, a brokerage firm may solicit non-binding indications of customer interest. But that “indication of interest” may only result in an actual purchase of shares if the investor reconfirms it after the registration statement becomes effective. Alternatively, a brokerage firm may solicit a “conditional offer to buy,” which may become binding after the registration statement becomes effective if the investor does not revoke it.
Morgan Stanley Smith Barney LLC ran into trouble when it adopted a policy on February 16, 2012 that used the terms “indications of interest” and “conditional offers” interchangeably. The policy did not require the broker to acknowledge whether the investor was required to reconfirm his interest before the purchase was executed. Further, the firm did not provide its financial advisors with any training or materials on the policy. Consequently, the sales staff and consumers may not have understood what type of commitment was solicited for the IPOs.
FINRA also found that Morgan Stanley Smith Barney LLC did not adequately monitor its financial advisors’ compliance with the policy. Additionally, FINRA found that the firm did not have adequate procedures to ensure that its brokers solicited “indications of interest” and “conditional offers” in line with the federal securities laws and FINRA rules.
It is vital that an investor understand exactly when they enter a contract to buy shares in an IPO. Investors should be able to have open discussions with their brokers about possible IPO investments without later finding out that their broker purchased shares in that IPO without their knowledge or consent. As Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, stated in the FINRA News Release, it is “the firm’s duty to establish clear procedural guidelines for soliciting conditional offers to buy and to educate its sales force regarding this type of solicitation. There must not be ambiguity regarding the customer’s obligations given the significant legal differences between an indication of interest and a conditional offer to buy.”
If your investment broker purchased shares of the Facebook IPO, Yelp IPO, or any other IPOs without your authorization, you should contact an attorney to discuss your options.
The Washington Post reports that law firms and in-house counsel are increasingly using alternative fee arrangements, such as flat fees, for litigation. When the economic downturn prompted corporate clients to scale back their outside legal spending several years ago, law firms responded by experimenting with alternative fees. Alternative fee arrangements can be anything that is not traditional hourly billing, including flat fees, success fees, and contingency fees.
Personal injury and other plaintiff’s litigation cases have used contingency fees for decades. In the past, though, corporate clients typically paid their lawyers by the hour, for both transactional and litigation work. Now, alternative fee arrangements have become fairly popular for transactional work, such as real estate deals. Alternative fee arrangements have been slower to catch on for corporate litigation work, however, because of a perceived uncertainty and unpredictability in litigation.
But now, lawyers and in-house counsel are working out systems, and in some cases software programs, to help them price most litigation scenarios for alternative fee arrangements. They are also negotiating carve outs in case unexpected events change the circumstances of the case.
In corporate litigation cases using alternative fee arrangements, the lawyer and the client typically agree to a payment system at the beginning of a case – often a flat fee with a success fee for certain scenarios, such as if the case is dismissed at an early stage of the lawsuit. The overall payment system is based on estimates of how much the case is likely to cost in total. Or, as in one example in the Washington Post article, the company may pay the law firm a pre-agreed flat fee for each phase of the litigation: investigation, discovery, trial preparation, trial, appeal, etc.
The Washington Post notes that this type of fee system is spreading throughout the legal community. For example, entire practice groups within several large law firms now exclusively use alternative fee arrangements, having completely stopped billing by the hour. The legal community’s perception of alternative fees has also changed: the Washington Post reports that in 2009, 28 percent of firm leaders believed alternative billing would be a permanent change in the legal industry. By 2013, however, 80 percent of firm leaders believed non-hourly billing was here to stay. Similarly, in a recent survey by the Association of Corporate Counsel of 1,200 general counsel, 37 percent of the chief legal officers expect the use of alternative fees to increase while only 4 percent expect it to decrease.
While large law firms are just beginning to adapt to alternative fee arrangements for litigation, small firms have been using them for years. Small firms are often more flexible and are more open to working out unconventional and innovative fee systems to provide clients with the most bang for their buck. In addition to flat fees, success fees, and contingency fees, when it meets the circumstances of the case, Mark Krudys also takes cases with blended fee arrangements, e.g., a low hourly fee blended with a lower percentage contingency fee. If you’re interested in exploring alternative fee arrangements like these for corporate litigation matters, consider working with a small firm to develop a system that specifically matches your needs.
Last week, the Financial Industry Regulatory Authority (FINRA) fined LPL Financial LLC, one of the country’s largest networks of independent broker-dealers, $950,000 for its failure to supervise sales of alternative investment products, including non-traded real estate investment trusts (REITs), oil and gas partnerships, business development companies (BDCs), hedge funds, managed futures and other illiquid pass-through investments. FINRA also ordered LPL to conduct a comprehensive review of its policies, systems, procedures and training to correct the failures. Many states set limits on the percentage of an investor’s overall portfolio that may be invested in these kinds of risky products. Similarly, many alternative investments, like REITs, limit the concentration of alternative investments in their offering documents. LPL, further, had set its own concentration guidelines for alternative investments. But none of these safeguards is a substitute for appropriate supervision by the brokerage firm.
FINRA found that from January 1, 2008 to July 1, 2012, LPL failed to sufficiently supervise sales of alternative investment products that violated the various concentration limits. During that time period, LPL had two different systems to oversee its alternative investment products. First, it used a manual process to determine whether an investment met suitability requirements, but this system relied on information that was often outdated and inaccurate. LPL then employed an automated system, but that database used flawed programming and was not timely updated with accurate suitability standards. FINRA also found that LPL failed to train its supervisory staff to consider state suitability standards when reviewing alternative investments. As a result, LPL exposed its customers to unacceptable risks by failing to tailor its supervisory system to the products it sold.
LPL agreed to pay the fine to settle the case against it, but it did not admit nor deny FINRA’s charges.
The Wall Street Journal reports that this is not the first time LPL has faced regulatory fines because of its sales of REITs. In May 2013, Massachusetts regulators fined LPL $500,000 for violating a state regulation prohibiting an investor from investing more than ten percent of their liquid net worth in REITs. In the same ruling, the Massachusetts regulators also ordered LPL to pay $4.8 million in restitution to clients. That penalty was part of a larger action by Massachusetts regulators against firms that sold REITs. In total, Massachusetts regulators collected more than $11 million in restitution and fines from six firms: LPL, Ameriprise Financial, Inc., Lincoln National Corp., Commonwealth Financial Network, Royal Alliance Associates, and Securities Americas.
If you are investing in alternative investments, especially non-traded REITS, you should check the concentration limits for these alternative investments in your offering documents and in your state. If you believe your investments exceed the legal concentration limits, you should consider discussing your options with an attorney.
When an employee leaves one job for another, they often are surprised to find out that their previous employer might be able to prevent them from working in the same industry. Many employers write provisions into their employment contracts that seek to prevent employees from working for competitors. However, these provisions do not always comply with Virginia law.
Employers may use only “reasonable” non-compete agreements.
In Virginia, courts will enforce non-compete agreements to protect an employer’s legitimate business interests, but only if they meet certain requirements. In particular, non-compete agreements may not be unduly burdensome on the employee’s ability to earn a living. This means that the provision must, at least, be limited in its (1) geographic scope and (2) duration. Although, when deciding if it is valid, courts consider the overall restriction as a whole.
In general, Virginia courts have upheld contracts not to compete only if they are sufficiently “narrowly drawn” to prevent direct competition with the employer by the former employee. See e.g., Home Paramount Pest Control Companies, Inc. v. Shaffer, et al., 282 Va. 412 (2011). For example, the Virginia Supreme Court upheld a non-compete clause that proscribed work on one specific project, for only two specific companies, and which was limited to only 12 months. Preferred Systems Solutions, Inc. v. GP Consulting, LLC, 284 Va. 382 (2012). Similarly, Virginia circuit courts have upheld an agreement not to compete that was limited to fundraising for local charities within 60 miles of four cities, all located within the same region and a contract that was limited to preventing a former employee from contracting with or divulging information about the employers’ customers after the employee was fired. Mut. Funding, Inc. v. Collins, 62 Va. 34 (Spotsylvania 2003); Zuccari, Inc. v. Adams, 42 Va. Cir. 132 (Fairfax 1997).
However, non-compete agreements may not prevent a former employee from engaging in activities that do not compete with the former employer’s business. For instance, the Supreme Court of Virginia struck down one such provision because it sought to prevent the employee from engaging “directly or indirectly” with competing businesses in any area in which the employee had worked in the previous two years. Home Paramount Pest Control Co., Inc. v. Shaffer, et al., 282 Va. 412 (2011). Even with the time and geographic limits, the Supreme Court found that the contract provision in that case was overly broad. The Virginia Supreme Court, and other courts applying Virginia law, have consistently held that similar restraints on trade are overbroad and unenforceable. See e.g., Modern Env’ts, Inc. v. Stinnett, 263 Va. 491, 495 (2002) (holding a restrictive covenant invalid because it prohibited the former employee from working, directly or indirectly and within a 50 mile radius of any of the employer’s offices, in any capacity with a competing company for one year after the former employee’s departure from the employer); Motion Control Systems, Inc. v. East, 262 Va. 33, 37-38 (2001) (holding a restrictive covenant invalid because it sought to prevent the former employee from engaging, directly or indirectly, with businesses similar to the employer within 100 miles of the employer’s office); Business Interiors v. Sawyer, 6 Va. Cir. 337, 338-39 (Norfolk 1986) (holding a restrictive covenant invalid because it prevented the former employee from working, directly or indirectly, for any company that might solicit business from the employer’s customers for one year after the former employee’s termination); Grant v. Carotek, Inc., 737 F.2d 410 (4th Cir. 1984) (holding a restrictive covenant invalid because it prohibited the former employee from contracting with any of the employer’s clients).
Recently, a circuit court judge in Fairfax, VA issued an opinion letter stating that a non-compete agreement was not enforceable because, even though the time limit was valid, the geographic scope was too broad. Therefore, the covenant was not narrowly tailored to protect only the employer’s legitimate business interest. In Wings LLC v. Capitol Leather, a leather repair company, Wings LLC, entered into an agreement with two employees, which stated that the employees could not, within 2 years of leaving the Wings LLC, directly solicit any customer who had received services from Wings LLC within the year prior to the employees’ departure. The contract also stated that the employees could not work for another company “in a position that is the same, or substantially the same” as their jobs with Wings LLC if that business had provided any service that competed with Wings LLC within the previous year. Moreover, the contract stated that this restriction on future employment applied in any U.S. state or foreign country in which Wings LLC had done business in the year before the employee’s departure.
When the two employees quit their jobs at Wings LLC intending to work for a competitor business, Capitol Leather LLC, Wings LLC sought to enforce the non-compete agreement in the employees’ contracts. Wings LLC claimed that the employees had received extensive training, learned confidential methods and techniques used by Wings LLC, learned Wings LLC’s marketing and business development methods, had Wings LLC’s pricing and financial information, and had access to confidential customer lists. Wings LLC argued that the employees should not be able to use that information to help Capitol Leather LLC compete with Wings LLC.
The Fairfax circuit court judge considered the non-compete agreement and decided that even though the two year time restriction was reasonable, the geographic restriction on the employees was not. In this case, Wings LLC operated primarily in northern Virginia, Maryland, and Washington, DC. However, the contract sought to prevent the employees from working anywhere in any of those jurisdictions. The Judge pointed out that preventing the employees from working, for example, in southwest Virginia was not narrowly tailored to meet Wings LLC’s legitimate business interests in northern Virginia. The Judge stated that such a restriction “puts a significant burden” on the employee’s ability to earn a living.
In sum, an employer may impose a limited restriction on an employee’s future employment, but it may not create overly broad constraints that are not connected to protecting legitimate business interests.
Independent Contractors may not be restrained by non-compete agreements.
An independent contractor is not an “employee” and, therefore, cannot be subject to a non-compete agreement. Nonetheless, employers occasionally try to apply non-compete agreements to independent contractors to reduce competition for their business.
Sometimes it is difficult to know whether a person is considered an “employee” or an “independent contractor.” In general, independent contractors have more control over their schedule and what tasks they perform. Often they work on a contract-basis for one task at a time. Independent contractors may also purchase their own equipment, supplies, insurance, and provide for their own office space and other business-related expenses.
If you are an independent contractor, under Virginia law, no company may prevent you from taking other jobs, even with their competitors.