Overview
Effective July 1, 2026, noncompetition agreements in Virginia will only be enforceable if an employer provides severance benefits, unless the employee is terminated for cause. This further amends the previous version of the law, which also restricts the use of noncompetes for low-wage employees. The amendment is not retroactive and only applies to agreements entered into, amended, or renewed after July 1, 2026.
In Depth
Virginia’s law previously only prohibited noncompetes for “low-wage employees,” defined as those earning less than the average weekly wage of the Commonwealth or who are entitled to overtime under the federal Fair Labor Standards Act. As of 2026, the average weekly wage is calculated to be $1,507.01 per week, or $78,364.52 over a full year. The definition of “low-wage employees” also includes interns, students, apprentices, certain trainees employed in trades and occupations, and independent contractors compensated at an hourly rate less than the median hourly wage for Virginia according to the Bureau of Labor Statistics for the US Department of Labor.
The law defines “covenant not to compete” broadly to include any provision in an employment contract “that restrains, prohibits, or otherwise restricts an individual’s ability” to compete with their former employer following termination. The law also provides that these agreements cannot “restrict an employee from providing a service to a customer or client of the employer if the employee does not initiate contact with or solicit the customer or client.” It does not include agreements related to trade secrets or confidential information.
Penalties for violations are potentially steep. Courts have the power to grant broad remedies where an employee challenges enforcement, including granting injunctive relief and awarding liquidated damages and reasonable attorneys’ fees. Employers are also required to pay $10,000 fines for each violation of the law.
In addition to banning noncompetes for low-wage employees, the amended law provides that noncompetes are only enforceable if employers provide “severance benefits or other monetary payment to” terminated employees, unless the employee is discharged for cause. The law does not define “cause.” It also requires that the severance benefits or other monetary payment “be disclosed upon execution” of the noncompetition agreement. The law does not specify what constitutes adequate benefits.
This follows the Court of Appeals of Virginia’s January 2026 decision in Sentry Force Security, LLC v. Barrera, which held that the prohibition on noncompetes extends to employee nonsolicitation agreements and to restrictions on a former employee’s ability to accept business from a customer when the employee has not initiated contact or solicited that customer.
Next steps
Given these new restrictions, Virginia employers should review their employment agreements and adjust accordingly.
For assistance in drafting and enforcing restrictive covenant agreements – in Virginia or elsewhere – please contact your regular McDermott Will & Schulte lawyer or one of the authors.