Virginia has become increasingly hostile to noncompetition agreements as of late. Starting July 1, 2026, Virginia employers will be prohibited from enforcing new noncompete agreements against employees who are laid-off or fired without cause—unless the employer pays them severance or another amount that it specifies upfront in the noncompete agreement. Before the law takes effect, Virginia employers should review their noncompete agreements and employee separation practices to ensure compliance and minimize legal and financial penalties.
What Restrictions Does the New Law Place on Business and How Will It Impact Noncompete Enforcement in Virginia?
On April 13, 2026, Governor Spanberger signed into law Senate Bill 170, amending Virginia’s noncompete statute to give employees who are laid off or terminated without cause stronger safeguards when faced with noncompetition agreements. For noncompete agreements entered into beginning July 1, 2026, employers who wish to enforce a noncompete against such employees must pay severance or offer some “other monetary payment” to those terminated employees. The law does not define what suffices as “other monetary payment.” The new law also requires employers to disclose the severance payment or other monetary payment when the noncompete is signed. Notice obligations also apply. Employers must post the language of the updated noncompete statute or a Virginia Department of Labor and Industry-approved summary alongside other notices required by state and federal law.
Employers will still be able to enforce noncompetes against employees who resign voluntarily or are fired for cause. The law does not affect existing noncompete agreements entered into before July 1.
Virginia law already bans employers from entering into or enforcing noncompete agreements with low-wage employees. A low-wage employee is defined as an employee who is either classified as non-exempt under the Fair Labor Standards Act (FLSA) or who is FLSA-exempt but has average weekly earnings that are less than the average weekly wage of Virginia, which is currently $1,507.01 per week, or $78,364.52 per year.
Review, Revise, and Record: Steps Employers Should Take to Ensure Compliance with the Amended Noncompete Statute
For all noncompete agreements effective after July 1, employers with Virginia employees should:
- Review and revise their noncompete agreements to disclose the severance or other monetary payment that employees will receive if they are subject to a layoff or other termination without cause. While the statute sets no minimum severance or monetary payment, employers will want to carefully consider what is sufficient, as mere token payments could run the risk of being invalidated by a court.
- In updating their noncompete agreements, employers should also consider defining for-cause terminations in order to further bolster the agreement’s future defensibility.
- Evaluate recordkeeping practices to ensure that for-cause terminations are sufficiently documented should a fired employee claim otherwise.
- Update workplace notices to include the revised statutory language.
The law does not restrict nonsolicitation agreements or non-disclosure agreements. However, employers should also consider reviewing their nonsolicitation agreements as well, because a Virginia court recently applied the low-wage statute to also ban terms related to solicitation of other employees. There is nothing in Virginia’s new amendment that explicitly alters the court’s decision.
Noncompliance Risks Backpay, Contractual Damages, Attorneys’ Fees, and Costly Administrative Penalties
Failure to comply with Virginia’s new noncompete amendment could expose employers to significant legal liability. If an employer tries to enforce an agreement that does not conform to the statute’s requirements against an employee, the law allows the employee to sue the employer under a now-broader private right of action. If the employee prevails on the claim, a court may award extensive damages, including providing backpay and contractual damages. Furthermore, if the Virginia Department of Labor and Industry finds that an employer attempted to enforce a noncompete without a severance package, it must impose a $10,000 civil penalty against the employer. Beyond these significant damages and penalties, a prevailing plaintiff is entitled to a mandatory award of attorneys’ fees and costs.
Because Virginia continues to place restrictions on the enforcement of noncompete agreements and other restrictive covenants, employers need to be proactive to protect their business interests and mitigate the risk that any restrictive covenant could be invalidated.
If you have questions on these amendments to Virginia’s noncompete statute or on how you can ensure compliance, please contact Nichole Atallah, Sarah Nash, Zachary Stinson, Corey Bohn, or another member of PilieroMazza’s Labor and Employment Group.
