Virginia is poised to impose new limitations on the circumstances in which employers may restrict employees from working for a competitor or engaging in other competing business activities.
As we reported in 2020, the Commonwealth first prohibited noncompete agreements for “low-wage” workers. Then as we reported in 2025, Virginia expanded those restrictions to prohibit noncompetes with employees who are entitled to overtime pay under the FLSA for any hours worked in excess of 40 hours in any one workweek (“non-exempt employees”).
On March 10, 2026, lawmakers in the Commonwealth took another step to restrict the use of noncompetes when they passed Senate Bill 170 (SB170), which, if signed by the Governor, would prohibit enforcement of a noncompete if the employer discharges the employer from employment without cause and does not provide the employee with severance benefits. The bill now awaits Governor Abigail Spanberger’s signature or veto.
Virginia’s Current Noncompete Ban for “Low-Wage” Employees
Virginia’s current law prohibits employers from entering into or enforcing noncompete agreements against “low-wage employees.” When Virginia’s noncompete law was first enacted in 2020, the term low-wage employee generally referred to (i) employees whose average weekly earnings falls below the Commonwealth’s average weekly wage, or (ii) certain employees, such as interns, whose hourly rate is less than Virginia’s median hourly wage for all occupations for the preceding year, as reported by the U.S. Bureau of Labor Statistics.
Beginning July 1, 2025, however, the statute expanded significantly. The definition of “low-wage employee” was amended to include non-exempt employees, meaning most non-exempt employees cannot be subject to a noncompete agreement regardless of salary level. As a result, employers generally cannot enter noncompete agreements with overtime-eligible employees, even if they earn above the state’s average weekly wage threshold.
Newly Passed Legislation Could Further Limit Noncompete Enforcement
If enacted, SB170 will amend Virginia’s noncompete law to make such agreements void and unenforceable against an employee who was discharged from employment without cause, unless the employer provides the employee a severance benefit or other monetary payment. Employers would also be required to disclose the severance benefit or monetary payment upon execution of the noncompete agreement. If signed by the Governor, the measure would take effect and apply prospectively to agreements entered into, amended, or renewed on or after July 1, 2026.
If SB170 is enacted, noncompetes would remain enforceable against discharged employees if the discharge was “for cause,” provided that the discharged employee is not a “low-wage employee.” The bill does not define what constitutes “cause” for an employee’s termination.
Importantly, SB170 does not include a minimum threshold amount or any other parameters for determining what is sufficient severance for enforcement of a noncompete provision. This issue may be clarified through additional regulations or guidance from the Virginia Department of Labor.
If SB170 is enacted, employers could face liability under the noncompete law for (i) attempting to enter into, enforce, or threatening to enforce a noncompete agreement against a low-wage employee, or (ii) attempting to enforce a noncompete against an employee who was terminated without cause and not subject to a severance benefit or other monetary payment. As a reminder, Virginia’s noncompete law provides employees with a civil private right of action. Upon successful employee action, courts may void unlawful non-compete agreements, order an injunction, and award lost compensation, liquidated damages, and reasonable attorneys’ fees and costs, along with a $10,000 civil penalty for each violation.
Employer Takeaways
Virginia employers should consider several practical steps to prepare for the possible July 1 effective date of SB170:
Review Employee Classifications
Because most non-exempt employees are considered “low-wage employees,” noncompetes generally cannot be used with overtime-eligible workers.
Evaluate Severance Practices
If the new legislation takes effect, enforceability of noncompetes after discharges may depend on whether severance or similar compensation is provided.
Reassess Restrictive Covenant Agreements and Strategies
Employers may need to rely more heavily on confidentiality, trade secret, and non-solicitation agreements to protect legitimate business interests. Employers should also consider defining for cause termination within their noncompete agreements.
Update Workplace Posters
Virginia’s noncompete law requires employers to display a copy or approved summary of the Act with their other workplace notices, or face fines of up to $1,000. Therefore, if SB170 is enacted, employers need to update their current poster to reflect the amended law.
Virginia is not the first (or likely the last) jurisdiction seeking to clamp down on noncompete provisions following an involuntary termination of employment. Several states, like Iowa, Massachusetts, and Montana, have already adopted similar or broader laws, and several courts applying New York law (particularly in the First Department – see Buchanan Capital Mkts., LLC v. DeLuca, 144 A.D.3d 508, 508 (1st Dep’t 2016)) have held that noncompete agreements are unenforceable where an “employer . . . does not demonstrate continued willingness to employ the party covenanting not to compete.” Our 50-State Noncompete Survey addresses those states that prohibit enforcement of a noncompete following termination of employment. Given this growing trend, multi-state employers should periodically review their employment agreements and separation practices to ensure they remain compliant with the evolving legal landscape affecting their workforce.
In the meantime, we will continue to monitor SB170 and report any relevant updates or changes.
