Virginia has enacted a series of new laws that continue to redefine the employment landscape. The Virginia Values Act fundamentally changes the legal rights and remedies available to employees who sue their employers under the Virginia Human Rights Act. The new law bans restrictive covenants for “Low-Wage” employees. The law takes effect July 1, 2020.
The law defines restrictive covenants as “an agreement that restrains, prohibits, or otherwise restricts an individual’s ability to compete with his former employer.” Note, the law still supports reasonable nondisclosure agreements and other efforts to prevent misappropriation of certain information. This includes trade secrets, as defined in § 59.1-336, and proprietary or confidential information.
“Low-wage” employees are broadly defined as those whose average weekly earnings are less than the average weekly wage of the Commonwealth. The definition expressly includes “interns, students, apprentices, or trainees employed, with or without pay, at a trade or occupation in order to gain work or educational experience.” Even independent contractors who earn “an hourly rate that is less than the median hourly wage for the Commonwealth for all occupations” (a bit less than $20 per hour right now) are included.
Given the average weekly wage in the Commonwealth is a little over $1,000, this “low-wage” is not so low. Significantly, “any employee whose earnings are derived, in whole or in predominant part, from sales commissions, incentives, or bonuses paid to the employee by the employer” are excluded.
A private right of action for employees seeking to challenge or enjoin their non-compete restriction has been created. If the employee is successful in such a challenge, the employer is liable for liquidated damages, lost compensation and attorneys’ fees. What constitutes “liquidated damages” is undefined by the statute.
The law requires an employer to post a DOLI-approved notice in the workplace summarizing the law. The new law also directly puts the DOLI into an active role in evaluating restrictive covenants. The Commissioner is directed to impose a civil penalty of up to $10,000 for each violation it determines.
The new law places a blanket prohibition on any restrictive covenant for essentially half of the workers in Virginia.