Virginia Employers Take Note: The Legal Landscape for Non-Compete Agreements Continues to Evolve

05.28.2026

Since July 1, 2020, Virginia Code Section 40.1-28.7:8 (the “Non-Compete Statute”) has barred Virginia employers from entering into, enforcing or threatening to enforce a “covenant not to compete” with a “low wage employee.”  

The Non-Compete Statute initially defined a “low wage employee,” in relevant part, as an employee whose average weekly earnings for the preceding year are less than the average weekly wage of employees in the Commonwealth.  According to the Virginia Department of Labor and Industry, for 2026, a “low wage employee” includes any employee whose average weekly earnings are less than $1,507.01 per week, which equates to $78,364.52 per year.

Effective July 1, 2025, the Virginia General Assembly expanded the definition of “low wage employee” to include all employees who are non-exempt (i.e., entitled to overtime compensation) under the Fair Labor Standards Act, regardless of earnings amount.  

In the 2026 session, the Virginia General Assembly further broadened the scope of the Non-Compete Statute in two significant respects.

Discharge Without “Cause” Will Require Severance or “Other Monetary Payment” to Enforce a Non-Compete Beginning July 1, 2026.

In a move that will affect all Virginia employers and employees, the General Assembly amended the Non-Compete Statute through SB 170 to provide that no “covenant not to compete” between “an employer and an employee” (not only between an employer and a “low wage employee”) is enforceable if the employer discharges the employee without “cause”  without providing “severance benefits or other monetary payment” to the employee.  The amendment further provides that the severance benefits or other monetary compensation “shall be disclosed upon execution of the covenant not to compete.”  Importantly, SB 170 states that “nothing in this act shall invalidate, alter, or otherwise affect any contract, covenant, or agreement entered into, amended, or renewed prior to July 1, 2026.” 

This new provision of the Non-Compete Statute does not define what constitutes “cause,” nor does it define or set a minimum requirement for the severance benefits or other monetary compensation that are required to enforce a non-compete when a discharge is without cause.  The new provision also does not include an express exception for non-competes executed in connection with the sale of a business. 

Non-Competes in the Healthcare Industry Are Also Subject to Big Changes Beginning July 1, 2026.

The General Assembly also passed SB 128 and HB627, which prevent employers from entering into, enforcing or threatening to enforce a “covenant not to compete” with any “health care professional,” which is broadly defined to include “any person licensed, registered, or certified by the Board of Medicine, Nursing, Counseling, Optometry, Psychology, or Social Work.”  

The ban on non-competes for such health care professionals does contain an exception for certain sale of business transactions.  The new provisions related to health care professionals also include a carve-out for agreements requiring repayment of all or part of recruitment-related costs, including relocation expenses, signing or retention bonuses, and other remuneration provided to induce relocation or establishment of a practice in a specified geographic area, as well as recruiting, education, or training expenses from a departing health care professional who has been employed for fewer than five years.  The new provisions further allow agreements with health care professionals that restrict them from soliciting or attempting to solicit the employer’s customers or actively sought prospective customers, with whom the health care professional had material contact during employment, for purposes of providing products or services that are the same as or substantially similar to those provided by the employer.   

These new provisions will become effective July 1, 2026, but will not invalidate, alter, or otherwise affect any contacts, covenants, or agreements entered into prior to July 1, 2026.

The Virginia Court of Appeals Has Also Interpreted the Scope of What Is a “Covenant Not to Compete” under the Non-Compete Statute.

The Virginia Court of Appeals has also recently provided guidance on the scope of the existing Non-Compete Statute in the case of Sentry Force Security, LLC v. Barrera. 

The Non-Compete Statute defines a “covenant not to compete” as a covenant or 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 with his former employer.”  The statute goes on to state that a covenant not to compete “shall not 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.”

The Barrera case involved claims that a former employee had solicited customers and employees of his former employer in violation of the customer and employee non-solicitation clauses of his agreement.  In response, the former employee contended that he was a “low wage employee” and that the customer and employee non-solicitation clauses were “covenants not to compete” that violated the Non-Compete Statute. 

The Court of Appeals held that the non-solicitation clause prohibiting direct solicitation of customers was not an unenforceable covenant not to compete within the definition set forth in the Non-Compete Statute.  By contrast, the Court of Appeals held that the employee non-solicitation provision did fall within the definition of a covenant not to compete under the Non-Compete Statute. 

Notably, the Court of Appeals did not designate the Barrera decision for publication, meaning that in future cases it will be considered as informative, but not as binding authority.  However, as of the date of this article, the Barrera case is the only appellate decision interpreting the applicability of the Non-Compete Statute to such non-solicitation clauses. Notably, both parties to the Barrera case have petitioned the Virginia Supreme Court for review of the Court of Appeals’ decision.  While the Virginia Supreme Court does not have to accept the appeals (and as of the date of this article has not decided whether to do so), if it does take the appeal, the Court of Appeals’ interpretation of the Non-Compete Statute could be subject to change. 

Takeaways for Employers

Violation of the Non-Compete Statute can lead to severe consequences for employers.  Remedies available to affected employees include injunctive relief, recovery of lost compensation, damages, and the employee’s reasonable attorneys’ fees and costs.  The statute also allows the Virginia Department of Labor and Industry to issue civil penalties of $10,000 for each violation.  

To avoid such consequences, prior to July 1, 2026, Virginia employers must make appropriate changes to their restrictive covenant agreements to ensure compliance with the new amendments to the Non-Compete Statute.  Employers should also evaluate their existing agreements in regard to employee non-solicitation clauses in light of the Barrera case.  Experienced employment counsel can help navigate this evolving legal landscape.