10 000 Mistake What Virginia S New Non Compete Law Means For Your

Virginia Noncompete Laws: Essential Information for Employers and Employees Regarding New Restrictions Virginia’s legal landscape regarding noncompete agreements is undergoing a significant transformation, impacting both employers and employees. Effective July 1, 2025, Senate Bill 1218 (SB 1218), signed into law by Virginia Governor Glenn Youngkin, introduces sweeping changes to how businesses can utilize these restrictive covenants. The new Virginia law is codified at Virginia Code § 40.1-28.7:8. This article provides a comprehensive guide to the new Virginia noncompete laws, outlining the key changes, exploring the implications for both employers and employees, and offering practical advice for navigating this evolving legal terrain. This shift reflects a growing national trend towards limiting the use of noncompetes, particularly for lower-wage workers, aiming to foster greater employee mobility and competition.

Understanding these changes is crucial for Virginia businesses and their workforce. This article will delve into the specifics of SB 1218, defining key terms, explaining who is protected, and outlining the potential consequences of noncompliance. Understanding the Evolving Landscape of Noncompete Agreements in Virginia Traditionally, noncompete agreements have served as vital tools for businesses to protect their competitive edge. These agreements aim to prevent former employees from leveraging insider knowledge, client relationships, and trade secrets to benefit competitors or start competing ventures. This protection is particularly important in industries with highly specialized knowledge, extensive client networks, or valuable proprietary information.

For instance, a software company with proprietary code would use a noncompete to prevent a former engineer from joining a competitor and using that knowledge to develop a similar product. A recent study by the Economic Policy Institute found that noncompetes can stifle innovation and wage growth. Taking Fear And Intimidation Out Of The Legal Process, And Arming You With The Facts On Behalf of Hogan & Pritchard, PLLC | Oct 9, 2025 | Firm News | There’s been a lot of attention on non-compete agreements in recent years — particularly on how they’ve been overused by some employers. Even workers at fast-food chains have had non-compete clauses in their employment contracts, preventing them from getting work in the same industry if they left their employer.

Despite the efforts of the Biden administration, changes to the law that would minimize the use of non-compete clauses on the federal level were blocked. However, some states have changed their laws to limit “non-competes” to those employees with valuable skills and/or knowledge that could benefit a competitor if they went to work for them immediately after leaving an... Virginia’s new law regarding non-competes took effect this July. It’s intended to protect “low-wage” employees from having to agree to these restrictive and often financially harmful clauses. The law states, “No employer shall enter into, enforce, or threaten to enforce a covenant not to compete with any low-wage employee.” 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. 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... 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... 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. Beginning July 1, 2025, a significant change to Virginia employment law will take effect, further strengthening protections for workers across the Commonwealth.

Under the newly enacted legislation, Senate Bill 1218, employers will be prohibited from entering into or enforcing non-compete agreements with any employee classified as non-exempt under the federal Fair Labor Standards Act (FLSA), regardless... This marks a major expansion of Virginia’s existing non-compete restrictions, which since 2020 have only applied to “low-wage” employees based on a defined salary threshold. With this new law, classification rather than compensation will be the controlling factor. A non-compete agreement is a contractual provision that restricts an employee from working for a competitor or starting a competing business for a certain period of time after leaving a company. While these agreements are intended to protect business interests, they can also often limit an employee’s job mobility and earning potential. As of July 1, 2025, any employee classified as non-exempt under the FLSA will be covered by the non-compete ban.

Non-exempt employees are typically hourly workers who are entitled to overtime pay. This classification encompasses a wide range of occupations and industries, including administrative, technical, customer service, retail, healthcare, and skilled trades. Previously, the law only covered employees earning less than the average weekly wage in Virginia, amounting to about $76,000 per year. Under the new legislation, that income-based limitation will no longer apply. The Virginia General Assembly convened on January 8, 2025 and adjourned sine die on February 22. During this session, elected officials introduced bills covering a wide range of subjects related to wages and other terms and conditions of employment, such as paid family and medical leave and changes in the...

Many bills died at various stages in the General Assembly or at the Governor’s desk by veto. However, a bill regarding restrictive covenants made it through the legislature and gained the Governor’s approval on March 24, 2025. Virginia already prohibits employers from entering into, enforcing, or threatening to enforce non-compete agreements with any “low-wage employee,” which covers just about every employee whose average weekly earnings are less than the average weekly... Starting July 1, 2025, Virginia will expand the prohibition on non-compete agreements by modifying the definition of “low-wage employee” to include any employee who is entitled to overtime compensation under federal wage and hour... Violations of this prohibition include a $10,000 civil penalty for each violation. Restrictive covenants, including non-compete agreements, are generally disfavored in Virginia because they place a restraint on trade.

However, a restrictive covenant is enforceable if it is narrowly drawn to protect a legitimate business interest, not unduly burdensome on an individual’s ability to earn a living, and reasonable in light of sound... Balancing the interests of the parties and public policy requires an assessment of the nature or functions of the prohibited activities, the geographic scope of the restriction, and the duration of the agreement. Ambiguous or overly broad terms concerning function, geography, or duration risks rendering the entire restrictive covenant unenforceable and, in turn, risks losing protection of legitimate business interests. In addition, attempting to enforce an ambiguous or overbroad restrictive covenant could result in exposure to counterclaims and damages. Employers and employees should review their restrictive covenants regularly to ensure compliance with and enforceability under Virginia law. Employers in particular should review their current non-compete agreements to ensure compliance with the modified definition of “low-wage employee” and avoid, among other things, civil penalties.

In light of the July 1 addition of non-exempt employees to the definition of “low-wage employees,” Employers should also consider auditing employees’ duties and responsibilities to ensure they are correctly classified. Vasseghi Law Group attorneys are available to review and provide guidance in these matters. Filed Under: Client Alert Tagged With: Client Alerts Whether working with our attorneys in estate planning, family law, business law or any of our other practice areas, we are committed to keeping you informed, prepared and protected. Stein Sperling attorneys understand the complexity of navigating the legal system. That is why we prioritize effective communication as much as we prioritize the mechanics of the law.

When working with our team, you will always know where you stand and what comes next. Posted in: Employment Law Tagged: Nidhi P. Patel Employers in Virginia who are currently using or planning on using restrictive covenant provisions in their employment contracts will have to update their contracts and policies come July 1, 2025. Virginia has amended its non-compete ban by redefining the salary threshold for non-exempt “low-wage employees”. Virginia law prohibits employers from entering into, enforcing, or threatening to enforce covenant not to compete agreements with low-wage employees.

Virginia broadly defines a “covenant not to compete” as any provision that restrains, prohibits, or otherwise restricts an employee’s ability, following the termination of his or her employment, to compete with his or her... Currently, a “low-wage employee” is defined as an employee whose average weekly earnings are less than the average weekly wage set by the Commonwealth, which, as of January 1, 2025, is $1,463.10 per week... Apr 14, 2025 | News, State-Specific Regulations A big shift is coming to Virginia employment law—and employers need to be ready. Beginning July 1, 2025, noncompete agreements will be prohibited for all employees eligible for overtime pay, regardless of how much they earn. If your business currently uses noncompetes as part of its employment strategy, now’s the time to reassess.

Virginia already bans noncompete agreements for most “low-wage employees.” As of 2025, that category includes workers earning less than $1,463.10 per week, or about $76,000 annually. This threshold has steadily increased since the law was first introduced in 2020. The new law goes a step further: overtime eligibility becomes the key factor. That means even employees earning well above the low-wage threshold—but who are classified as nonexempt under the federal Fair Labor Standards Act—will now fall under the noncompete ban. Here’s an important point: noncompete agreements entered into before July 1, 2025, are still valid. The law is not retroactive, so employers don’t need to tear up current contracts—but they cannot enforce new noncompetes against overtime-eligible workers signed after the law goes into effect.

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