What's Happening?
Virginia has introduced new restrictions on post-employment non-compete agreements, effective July 1, 2026. Under the new law, such covenants are unenforceable if an employer terminates an employee without cause unless severance benefits or another form
of monetary payment is provided and disclosed at the time the agreement is executed. This change applies to agreements entered into, amended, or renewed on or after the effective date and does not apply retroactively. The law continues to prohibit non-compete agreements with low-wage employees, defined as those earning less than $78,364.52 annually or classified as nonexempt under the Fair Labor Standards Act. The new provision also introduces conditions for enforcing non-competes with exempt and highly compensated employees, requiring additional compensation to be disclosed. The law does not address non-compete agreements in the sale-of-business context, which remain outside its scope.
Why It's Important?
The new restrictions on non-compete agreements in Virginia represent a significant shift in employment law, potentially impacting both employers and employees. For employers, the requirement to provide and disclose additional compensation introduces new financial and administrative considerations when drafting non-compete agreements. This change aims to protect employees from restrictive covenants that could limit their future employment opportunities, particularly when terminated without cause. The law's focus on transparency and compensation aligns with broader trends in employment law aimed at balancing employer interests with employee rights. Employers must now carefully structure non-compete agreements to ensure compliance, which may involve revising existing contracts and consulting legal counsel to navigate the new requirements.
What's Next?
Employers in Virginia should prepare for the law's implementation by reviewing and potentially revising their non-compete agreements to ensure compliance with the new requirements. This includes clearly defining severance benefits or other monetary payments and ensuring these are disclosed at the time of agreement execution. Employers should also consider alternative strategies to protect proprietary information, such as non-solicitation covenants. Multistate employers must ensure their agreements comply with varying state laws, as similar legislative changes are occurring across the U.S. Legal interpretations of the new law's provisions, particularly regarding 'separate compensation,' will likely evolve as courts address disputes under the new framework.
