VIRGINIA CASE FOR NON COMPETE

FACTS:

A corporation filed its amended motion for judgment against a doctor, alleging that the doctor, the corporation’s former employee, breached a covenant not to compete. After the Circuit Court of Campbell County (Virginia) denied the doctor’s motion to dismiss, and following a bench trial, a judgment was entered in favor of the corporation. The doctor appealed. He asserted that the former corporation cannot “engage in the practice of medicine” in Virginia because it does not have a license to practice medicine in this Commonwealth. As a consequence, he contends that the former corporation does not have a legitimate business interest in enforcing the covenant not to compete.

ISSUES:

The issue here is whether the corporation, which is not a professional corporation, has a legitimate business interest in enforcing a covenant not to compete with its former employee, a licensed physician.

DISCUSSION:

When the parties executed the employment agreement, the corporation was a professional corporation, and its sole director and shareholder was a physician. The employment agreement contained a non compete provision. Later, the corporation converted from a professional corporation to a non-professional corporation by operation of law upon the physician’s death. The doctor asserted that the corporation was not permitted to “engage in the practice of medicine” in Virginia because it did not have a license to practice medicine in Virginia. A covenant not to compete between an employer and an employee will be enforced if the covenant is narrowly written to protect the employer’s legitimate business interest, is not unduly burdensome on the employee’s ability to earn a living, and does not violate public policy. Restrictive covenants are disfavored restraints on trade and, therefore, the employer bears the burden of proof and any ambiguities in the contract will be construed in favor of the employee. Each non-competition agreement must be evaluated on its own merits, balancing the provisions of the contract with the circumstances of the businesses and employees involved.  The Court first considered whether the Family Care Center, a non-professional corporation, may lawfully engage in the practice of medicine in Virginia, as set forth in the employment agreement. A non-professional corporation cannot engage in the practice of medicine in Virginia. It is unlawful for a corporation to practice a profession or occupation without holding a valid license as required by statute or regulation. Specific terms of the employment agreement states, in part, that Family Care Center “is presently engaged in the practice of medicine.” Family Care Center could not and cannot do so because it does not have a license to practice medicine from the Board of Medicine as required by Code §§ 54.1-2902 and -2929. Therefore, the Court held that the Family Care Center, which cannot practice medicine, cannot engage in a competing practice of medicine with Dr. Parikh, who is a physician licensed to practice medicine in this Commonwealth. Since the Family Care Center cannot lawfully engage in the practice of medicine, it has no legitimate business interest in enforcing the covenant not to compete with Dr. Parikh.

JUDGMENT:

The judgment was reversed and final judgment was entered in favor of the doctor.

Disclaimer:

These summaries are provided by the SRIS Law Group.  They represent the firm’s unofficial views of the Justices’ opinions.  The original opinions should be consulted for their authoritative content