What's Happening?
Starting July 1, 2026, Virginia will enforce new restrictions on post-employment non-compete agreements. Under the new law, such covenants are unenforceable if an employer terminates an exempt employee without cause unless severance benefits or another
form of monetary payment is provided and disclosed at the time the covenant is executed. These restrictions apply only to agreements entered into, amended, or renewed on or after the effective date and are not retroactive. The law maintains the existing ban on non-compete agreements for low-wage workers, defined as those earning less than $78,364.52 annually or classified as nonexempt under the Fair Labor Standards Act. The new provision introduces conditions for enforceability, requiring additional compensation and disclosure, and applies only to employees terminated without cause.
Why It's Important?
This legislative change reflects a growing trend towards limiting the use of non-compete agreements, particularly for lower-wage and non-exempt employees. By imposing conditions on enforceability, the law aims to protect employees from restrictive covenants that could hinder their ability to find new employment. For employers, this means revisiting and potentially restructuring non-compete agreements to ensure compliance with the new requirements. The law also underscores the importance of transparency and fair compensation in employment agreements, which could influence broader employment practices and policies. Employers must carefully consider how they implement non-compete agreements and ensure that any required compensation is clearly disclosed and documented.
What's Next?
Employers in Virginia should review their employment agreements and non-compete clauses to ensure compliance with the new law. This may involve revising offer letters, employment agreements, and onboarding processes to include necessary disclosures. Employers should also explore alternative measures to protect proprietary information, such as non-solicitation covenants and robust return of company property policies. As more states consider similar legislation, multistate employers should work with legal counsel to ensure their agreements comply with varying state laws. The law's impact on the enforceability of non-compete agreements in the sale-of-business context remains to be seen, but employers should be prepared for potential legal challenges and adjustments.
