Are your noncompetes enforceable? Government contractors face new scrutiny

Noncompete agreements can be an effective way to protect your business if former employees or independent contractors are working for a rival business and using the skills, information, and contacts they acquired while working for you. A recent Virginia Circuit Court decision, however, highlights the need for companies that do government contracting to reevaluate the legality of their existing noncompetes. In the case, Fairfax County Circuit Judge John M. Tran invalidated a government contractor's noncompete for being unduly restrictive and overly broad in violation of public policy. The decision offers a number of lessons to help you avoid seeing your noncompetes meet a similar fate.

Facts

The Metis Group was one of several government contractors receiving a blanket purchase agreement to provide psychological services to the U.S. Army. The agreement allowed the Army to enter into various types of task orders with the contractors, which competed to provide the services.

The Metis Group had been awarded several task orders. To service the orders, the company entered into independent contractor agreements with several doctors and/or their practices. The independent contractor arrangements contained a noncompete providing that upon termination of the agreement by either party, the contractor would not seek to perform psychological services for the Army for 24 months. After the Metis Group's task orders ended, the Army didn't renew them. Nevertheless, the company's independent contractor agreements with the doctors remained in force.