In a significant development for Virginia employers, Virginia has expanded its statute concerning non-compete agreements. Effective July 1, 2025, amendments to Virginia Code § 40.1-28.7:8 will prohibit employers from entering into or enforcing non-compete agreements with any non-exempt employee. This change marks a further restriction on the enforceability of non-compete agreements in Virginia.
Expanding the Definition of “Low-Wage Employee”
The existing Virginia law, enacted in 2020, already prohibited non-compete agreements for “low-wage employees,” defined primarily as those earning less than the average weekly wage in the state. For 2025, this threshold currently stands at $1,463.10 per week, or approximately $76,081 annually.
The newly enacted amendment broadens this definition considerably. Moving forward, the category of “low-wage employee” will now include any employee entitled to overtime compensation under the Fair Labor Standards Act (FLSA). This means that regardless of their average weekly earnings, if an employee is classified as non-exempt under the FLSA, they cannot be subject to a non-compete agreement entered into or renewed on or after July 1, 2025.
This expansion will extend protection against non-compete clauses to a significantly larger portion of the Virginia workforce, encompassing many hourly and lower-salaried employees who were previously not covered by the “low-wage” definition based solely on their earnings.
What Remains the Same
It’s important to note that the amendment does not affect all employees. Employers in Virginia can still enter into and enforce non-compete agreements with employees who are classified as exempt under the FLSA and earn more than the average weekly wage in Virginia. Additionally, the existing exception for employees whose earnings are derived primarily from sales commissions, incentives, or bonuses remains in place.
Furthermore, the amendment is not retroactive. Non-compete agreements entered into or renewed before July 1, 2025 are not invalidated by this change.
The law also continues to permit the use of non-disclosure agreements designed to protect trade secrets and confidential information.
Implications for Employers
Virginia employers should take immediate steps to understand and comply with these upcoming changes. Key actions include:
- Auditing Employee Classifications: Employers should carefully review the FLSA classification (exempt vs. non-exempt) of all employees, particularly those subject to, or being considered for, non-compete agreements.
- Reviewing Existing Agreements: While existing agreements are grandfathered, employers should assess their enforceability under the amended law if they contemplate renewal after July 1, 2025.
- Updating Employment Documents: Offer letters, employment agreements, employee handbooks, and severance agreements should be reviewed and revised to reflect the new restrictions on non-compete clauses for non-exempt employees.
- Ensuring Proper Workplace Notices: Virginia law requires employers to post a copy of the non-compete statute or an approved summary in the workplace. Employers will need to ensure their postings reflect the amended law by July 1, 2025.
Employee Rights and Penalties for Non-Compliance
Low-wage employees, as newly defined, can bring civil actions against employers who attempt to enforce unlawful non-compete agreements. Successful employees can seek injunctive relief, liquidated damages, lost compensation, and reasonable attorney fees and costs.
Furthermore, the Virginia Department of Labor and Industry can impose civil penalties of $10,000 per violation on employers who enter into, enforce, or threaten to enforce non-compete agreements with employees now classified as low-wage under the expanded definition.
Conclusion
The amendment to Virginia’s non-compete statute represents a significant expansion of protections to a broader segment of the workforce. As July 1, 2025 approaches, Virginia employers must adapt their practices and agreements to ensure compliance with these new regulations. Failure to do so could result in costly legal challenges and penalties.
The ThompsonMcMullan attorneys are available to answer your questions and provide legal guidance on policy and document updates and the impending impacts to your business; contact us here.
