In 2025, Virginia’s existing non-compete statute, Va. Code. § 40.1-28.7:8, was expanded to prohibit post-employment non-compete agreements and certain non-solicitation restrictions with any non-exempt employee, not just those paid less than the average weekly wage. The change to this statute rendered it unlawful for employers to enter into a non-compete agreement or certain non-solicitation restrictions with any employee entitled to overtime pay under the FLSA.
A bill to further limit the enforceability of non-compete agreements for employees who are involuntarily terminated is heading to Governor Spanberger’s desk this month.
Senate Bill 170, if signed by the Governor, would add a new subsection to Va. Code. § 40.1-28.7:8, stating that a non-compete agreement between an employer and employee is not enforceable “if such employer discharges such employee from employment without providing severance benefits or other monetary payment to such employee, unless such employer discharges such employee for cause.” However, if the employee is fired “for cause,” the non-compete agreement is enforceable.
Under this bill, employers must disclose severance benefits or payments before an employee signs a non-compete agreement.
The new subsection will allow an employee to bring a civil action against a former employer who violates this new language restricting non-compete enforcement against terminated employees. This marks a change from the current statute, which only allows “low wage employees,” as defined in the statute, to file suit against employers who violate it. The new bill creates a private right of action with a two-year statute of limitations, allowing employees to sue for injunctive relief, lost wages, and attorneys’ fees when employers attempt to enforce invalid non-compete agreements.
If signed, this will be a significant development in Virginia employment law and in how employers handle post-employment restrictions.
The bill passed with broad support from both sides of the aisle in the House of Delegates and the Senate. Governor Spanberger now has until April 13 to take action on the legislation.
If signed by the Governor, this bill would affect only noncompete agreements entered into after July 1, 2026, when the legislation would become effective.
If this bill is signed into law, Virginia employers should review their non-compete agreements with counsel before July 1, 2026, to ensure compliance with the new requirements.
The Labor and Employment attorneys at ThompsonMcMullan will stay apprised of these potential changes and can work with you to review your non-compete agreements.
