Virginia To Ban Non Competes For Non Exempt Employees Effective July 1

Bonisiwe Shabane

-Oct 31, 2025, 1:04 PM

virginia to ban non competes for non exempt employees effective july 1

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. Effective July 1, 2025, the current Virginia statutory restriction on non-competition agreements for “low-wage employees” will expand to cover all non-exempt employees under the Fair Labor Standards Act (FLSA). This amendment, enacted through SB 1218 and signed into law on March 24, 2025, prohibits employers from entering into, enforcing, or threatening to enforce non-compete agreements with any employee classified as non-exempt under the... Previously, Virginia’s non-compete ban, codified at Va. Code § 40.1-28.7:8 and effective since 2020, applied only to employees earning less than the Commonwealth’s average weekly wage (currently $1,463.10 per week or $76,081.14 annually).

The new amendment broadens the definition of “low-wage employee” to include all employees entitled to overtime pay, thereby covering a larger segment of the workforce. The amendment does not apply retroactively and will not affect non-competition agreements entered into or renewed before July 1, 2025. Employers should be aware, however, that misclassification of employees as exempt could result in unintended violations of the statute. Enforcement provisions remain robust. Employees subject to unlawful non-compete agreements may bring a private right of action within two years of the agreement’s execution, discovery, termination, or attempted enforcement. Courts may void such agreements, issue injunctions, and award lost compensation, liquidated damages, reasonable attorneys’ fees, and civil penalties of $10,000 per violation.

The Virginia Department of Labor and Industry is also authorized to impose civil penalties for violations, including up to $1,000 for failure to post required notices. Employers must continue to display a copy of the statute in the workplace where other required workplace notices are posted. Failure to comply with the posting requirements may result in additional penalties. Virginia has further restricted noncompete agreements. Effective July 1, 2025, Virginia Code § 40.1-28.7:8 will prohibit Virginia employers from entering into non-competition agreements with employees who are classified as non-exempt under the Fair Labor Standards Act (FLSA). The FLSA is the federal law that governs how employees are paid.

Nonexempt employees are those who are subject to minimum wage and overtime provisions of the FLSA. The updated law will not affect employees who meet the requirements for an exemption as set forth by the FLSA, for example, employees who meet with executive, professional, and administrative salary basis and duties. As a reminder, Virginia Code § 40.1-28.7:8 already bars covenants not to compete with “low-wage employees.” A low-wage employee is one whose average weekly earnings are less than the annually adjusted threshold—projected to be... This amendment adds nonexempt employees to the definition of low-wage employees. The 2024 amendments preserve all existing carve-outs, including the exception for employees whose earnings are “predominantly” derived from commissions, incentives, or bonuses. Confidentiality agreements and narrowly tailored customer non-solicitation provisions that do not operate as de facto non-competes remain permissible.

To remain in compliance, Virginia employers should: DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Attorney Advertising. © Whiteford var today = new Date(); var yyyy = today.getFullYear();document.write(yyyy + " "); Please take our short survey – your perspective helps to shape how firms create relevant, useful content that addresses your needs: Copyright © var today = new Date(); var yyyy = today.getFullYear();document.write(yyyy + " "); JD Supra, LLC

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.

Effective July 1, 2025, Virginia has banned covenant not to compete agreements between employers and those employees classified as non-exempt under the Fair Labor Standards Act (FLSA). Under the law, a “covenant not to compete” is an agreement “between an employer and employee that restrains, prohibits, or otherwise restricts an individual’s ability, following the termination of the individual’s employment, to compete... Importantly, the law does not void non-compete agreements between non-exempt employees and employers that were executed before July 1, 2025. However, after July 1, employers who “enter into, enforce, or threaten to enforce a covenant not to compete” with a non-exempt employee will “be subject to a civil penalty of $10,000 for each violation,”... As we described in our previous blog post, in July 2020 Virginia banned non-competes for “low-wage” employees and independent contractors. Under that law, “low-wage” workers are those who are earning less (from all earnings, including salary, bonuses, and commissions) than the median wage in Virginia, which in 2025 is calculated at $1,463.10 per week...

A “low-wage” worker under that law excludes those “whose earnings are derived, in whole or predominant part, from sales commissions, incentives, or bonuses.” A notable aspect of 2025 law is that under its definition sections, “A ‘covenant not to compete’ shall not restrict an employee from providing a service to a customer or client of the employer... Since this law generally only prohibits non-competes against low-wage workers and non-exempt employees, it is fair to assume that the non-solicitation provision only prohibits such broad non-solicitation of customers agreements when they are used... Effective July 1, 2025, Virginia employers will be prohibited from entering into, enforcing, or threatening to enforce noncompete agreements with employees classified as nonexempt under the Fair Labor Standards Act (FLSA) — regardless of... The current definition of "low-wage employee" (those earning less than $76,081 per year) will expand to include any nonexempt employee. Employers violating this rule could face injunctive relief, damages (including liquidated damages), attorneys’ fees and costs, and a $10,000 civil penalty per violation.

Noncompete agreements entered into before July 1, 2025 are not affected by the new law if the employee earns more than $76,081 annually. Nondisclosure agreements (NDAs) protecting trade secrets and confidential information are still permitted.

Virginia To Ban Non Competes For Non Exempt Employees Effective July 1

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