New Amendment Further Restricts Non-Competes in Virginia

Beginning on July 1, 2025, Virginia’s existing non-compete statute, Va. Code § 40.1-28.7:8, will be expanded to prohibit post-employment non-compete agreements and certain non-solicitation covenants with any non-exempt employee, not only those who are paid less than the average weekly wage in Virginia.

Virginia’s non-compete statute has been in effect since July 1, 2020. The statute prohibits employers from entering into, enforcing or threatening to enforce a non-compete against a “low-wage employee,” and also limits the scope of lawful non-solicitation covenants entered with any “low-wage employee.” Under the current statute, a “low-wage employee” is defined as any employee who earns less than the average weekly wage in the Commonwealth, as calculated and reported quarterly, and any and independent contractor who is compensated for services at an hourly rate less than the median hourly wage for all occupations as set by the U.S. Bureau of Labor Statistics. Employees whose earnings are derived, in whole or in predominant part, from sales commissions, incentives, or bonuses paid to the employee by the employer are not “low-wage employees.”

SB128 was signed into law by Governor Glenn Youngkin in March 2025. The bill amends Virginia’s non-compete statute to include in the definition of “low-wage employee” all employees who are entitled to overtime compensation under the federal Fair Labor Standards Act. Therefore, it will be unlawful for any employer to enter into a non-compete agreement or certain customer non-solicitation restrictions with any non-exempt employee on or after July 1, 2025. Employers may still enter non-competes with exempt employees who earn more than the average weekly wage in Virginia, and with employees who are paid predominantly by commission or other incentives. The amendment does not invalidate, alter, or otherwise affect any contracts, covenants, or agreements entered into or renewed prior to July 1, 2025.

Employers who violate the statute, as amended, may face civil actions as well as statutory penalties. An employee who prevails in an action under the statute can obtain injunctive relief, liquidated damages, lost compensation, and other damages, and shall receive reasonable costs, including expert witness fees and attorney fees. Additionally, any employer who violates this law is subject to a civil penalty of $10,000 for each violation. Employers are still required to post a copy of the new law or a summary approved by the Virginia Department of Labor and Industry in the same location where other employee notices required by state or federal law are posted.

In light of the upcoming expansion of Va. Code § 40.1-28.7:8, many employers are taking steps now to prepare for compliance, including reviewing the exemption classifications of employees subject to restrictive covenants and updating agreements to conform to the revised statute.