Virginia Expands Restrictions on Employee Non-Compete Agreements

Virginia employers must reassess their non-compete agreements to ensure they will be enforceable against employees who are discharged without cause and certain lower-wage workers. Specifically, SB 170 will be effective on July 1, 2026, and it further limits the enforceability of employee non‑compete agreements by broadening existing prohibitions and imposing new conditions tied to employee separations.

First, the law renders any covenant not to compete unenforceable where an employer discharges an employee without cause unless the employer provides severance benefits or other monetary payment, which must be disclosed at the time the non‑compete is executed.

Second, the law continues Virginia's longstanding prohibition on non‑competes for "low‑wage employees," a definition that remains expansive and includes not only employees below the Commonwealth's average weekly wage, but also individuals entitled to overtime compensation and certain independent contractors compensated below the median hourly wage. Employers may not enter into, enforce, or threaten to enforce non-compete agreements against covered workers, and violations may give rise to civil actions, injunctive relief, liquidated damages, and attorneys' fees. Civil penalties of up to $10,000 per violation may also be imposed by the Commissioner of Labor and Industry.

While the law does not limit the use of confidentiality or non‑disclosure agreements protecting trade secrets and proprietary information, it materially increases risk around post‑employment restrictive covenants, particularly in the context of layoffs or reductions in force. In light of continued state‑level scrutiny of non-compete practices, employers with Virginia workforces should review existing templates and separation practices to ensure compliance with the amended law and to align restrictive covenant strategies with evolving enforcement trends.

Finally, the law applies prospectively and does not invalidate agreements entered into, amended, or renewed prior to July 1, 2026.

Recommended Next Steps for Employers

• Review non‑compete templates for Virginia employees to confirm compliance with the amended statute.
• Audit current classifications to identify "low‑wage employees" for whom non‑competes are prohibited and ensure managers do not seek enforcement.
• Evaluate separation and reduction‑in‑force practices to assess whether non‑competes are being used in situations where severance is not provided.
• Consider whether confidentiality, non‑solicitation, or trade‑secret protections can achieve business objectives with reduced enforcement risk.

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Please feel free to contact the authors, Amanda Gómez and Roy P. Salins, or another member of DWT's employment services group if you have any questions about how SB 170 may impact your company. To stay informed, sign up for our alerts.