What happened?

On March 24, 2025, Governor Glenn Youngkin signed into law legislation that amends the threshold compensation level of a “low-wage employee” with whom the Commonwealth restricts employers from entering into non-compete agreements.

Overview:

This legislation protects low-wage workers from overly restrictive employment agreements that could limit their future job opportunities and career mobility.

• Expanded Definition: The law expands the definition of “low-wage employee” to include workers eligible for overtime compensation under federal law, regardless of their average weekly earnings.

• Prohibition: Employers are prohibited from entering into, enforcing, or threatening to enforce non-compete agreements with low-wage employees.

• Civil Actions: Low-wage employees can bring civil actions against employers who attempt to enforce non-compete agreements, potentially voiding the agreement and recovering damages, attorney fees, and costs.

• Exceptions: Employers can still use nondisclosure agreements to protect trade secrets and confidential information.

• Penalties: Employers violating the non-compete prohibition face a civil penalty of $10,000 per violation and must post these provisions in their workplace.

• Grandfather Clause: Non-compete agreements entered into or renewed before July 1, 2025, remain valid.

Employer Takeaway:

• Review Contracts and Update Notices: Employers should review existing contracts to ensure compliance and avoid penalties, and update posted employee notices to include the new provisions.

• Adjust Strategies: Employers should focus on strong confidentiality, nondisclosure, and non-solicitation clauses and adjust retention strategies to remain competitive without restricting post-employment opportunities.

Source References

• VA 1218 – Covenants not to compete prohibited

Resources

• Virginia Code § 40.1-28.7:8

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