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Non-Competes in Virginia Face New, Complicated Restrictions

Virginia continues to limit the use of non-competes. In recent years, Virginia has already banned non-competes for all “low-wage employees” – currently defined as employees who earn less than $1,507.01 per week, or about $78,000 per year, and also those who are entitled to overtime under the federal Fair Labor Standards Act.

And now, with the enactment of SB 170, Virginia is requiring employers to offer severance benefits or other monetary payment if an employee is subject to a non-compete and is terminated without cause.

Severance Payments Required

Importantly, the severance benefits or other monetary payment must be disclosed upon the execution of the non-compete agreement.  In other words, a severance package offered after the non-compete is signed will not make the non-compete enforceable.

Failure to adhere to Virginia’s laws on non-competes can be costly. An employee can bring a private civil action against an employer, former employer, or other person who attempts to enforce a non-compete in violation of Virginia’s non-compete law. An action can be brought within two years of the later of (i) the date the non-compete was signed, (ii) the date the low-wage employee learns of the non-compete, (iii) the date the employment relationship is terminated, or (iv) the date the employer takes any step to enforce the non-compete. Employers may also be subject to a civil penalty of $10,000 for each violation.

Notably, the bill is silent as to what constitutes termination “for cause”, what amount of severance benefits or monetary payment should be offered to the employee, and what constitutes “severance benefits or monetary payment”.  These questions are essential to the law and are likely to be litigated.

Effect on Other Restrictive Covenants

The definition of a non-competition agreement remains unchanged.  Accordingly, properly drafted nondisclosure agreements protecting trade secrets or proprietary and confidential information should remain enforceable.

As to non-solicitation agreements, the Court of Appeals of Virginia recently provided guidance in the unpublished Sentry Force Security, LLC v. Barrera, 2026 Va. App. LEXIS 54 (Va. Ct. App. Jan. 27, 2026) decision.  The court held that Virginia’s non-compete statute does not prohibit employers from enforcing non-solicitation agreements.  However, a non-solicitation agreement is unenforceable if it restrains low-wage employees from accepting unsolicited business from a customer.

And—importantly—the court held that a non-solicitation provision that bars an employee from soliciting their former coworkers after the employee no longer works for the employer falls within the scope of a non-competition agreement and is therefore unenforceable against a low-wage employee.

Next Steps

This new Virginia law, SB 170, applies only to agreements entered into, amended, or renewed on or after July 1, 2026.  That leaves employers with some time to review and update their template non-compete agreements to include a clear disclosure of severance benefits or other monetary payments that will be provided in the event of termination without cause.  Employers should also review any customer or employee non-solicitation language carefully in light of the Sentry Force Security decision and make revisions as necessary.

In light of the open questions left by SB 170, employers should also review their termination policies to ensure they clearly define what constitutes termination “for cause”. With SB 170, it is even more important that the reasons for termination be well documented.  Employers are also required to post a copy of the law or a summary approved by the Virginia Department of Labor and Industry in the same location where other required employee notices are posted.  A Department-approved summary has not yet been provided.

Other New Restrictions on Restrictive Covenants

The Commonwealth also recently enacted SB 240 which, effective July 1, 2026, prohibits any person, in connection with the sale or offer to sell a franchise in the Commonwealth, from directly or indirectly offering or entering into a franchise agreement that restricts the right of a franchisee to engage in the business of offering, selling, or distributing goods or services at retail after termination or expiration of the franchise agreement. There is a carve-out for sales agreements under which a franchisee sells a franchise to a third party or back to the franchisor, permitting the agreement to include a term restricting the franchisee’s right to engage in the business of offering, selling, or distributing goods or services at retail for a period of no more than two years after the sale.

Virginia has also further restricted the use of noncompete agreements for health care professionals with the enactment of SB 128.   Beginning July 1, 2026, non-competition agreements for health care professionals will be prohibited, regardless of whether the health care professional is considered a “low-wage employee.” Health care professionals are defined in the bill as “any person licensed, registered, or certified by the Board of Medicine, Nursing, Counseling, Optometry, Psychology, or Social Work.”  There are some carve-outs to this bill, including nondisclosure agreements intending to protect trade secrets or proprietary or confidential information, restrictive covenants related to the sale of a business, agreements providing for the repayment of relocation-related costs and recruiting, education, or training expenses from a departing health care professional who has been employed for fewer than five years, and agreements prohibiting health care professionals from soliciting or attempting to solicit business from the employer’s customers for a stated period of time.

We understand that the new laws regarding restrictive covenants are very confusing and have left several open questions for employers to grapple with.  Please let us know if you would like to discuss your organization’s approach to these issues.

Additional employment-related changes continue to be enacted in Virginia. Stay tuned for more information.