Virginia’s Governor Abigail Spanberger has signed Senate Bill 170 into law, which will change the landscape of non-competes in the Commonwealth. Under the existing statute, covenants not to compete are prohibited for employees earning an annual wage less than $78,365 (for calendar year 2026) or who are classified as non-exempt under the Fair Labor Standards Act. The new law leaves those prohibitions in place. Now, under the new statute, for all other employees who previously could be subject to a lawful covenant not to compete, Senate Bill 170 provides that no covenant not to compete is enforceable if the employer discharges the employee without providing severance benefits or other monetary payment, unless the employer discharges the employee for cause. The new law does not define "severance benefits” or "cause,” and it does not prescribe the amount of the monetary payment.
The severance benefits or monetary payment must be disclosed upon execution of the covenant not to compete. In other words, employers cannot decide to provide severance or some other monetary payment for the first time upon the employee’s separation.
The new law goes into effect on July 1, 2026, and applies only to agreements "entered into, amended, or renewed” on or after that date.
The definition of "covenant not to compete” under the existing statute remains. It includes a covenant or agreement between an employer and employee that restrains, prohibits, or otherwise restricts the employee’s ability, following the termination of employment, to compete with the former employer. It also provides 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.
In addition, the existing statute sets forth civil penalties for noncompliance in the amount of $10,000 for each violation. The statute also continues to impose civil penalties for employers that do not post a copy of the statute or a summary approved by the Department of Labor in the same location where other employee notices required by state or federal law are posted.
On the same day the Governor signed Senate Bill 170 into law, she also signed House Bill 627, which prohibits the use of covenant not to compete with certain health care professionals, including "any person licensed, registered, or certified by the Board of Medicine, Nursing, Counseling, Optometry, Psychology, or Social Work.”
Employers with Virginia employees should take note of these developments and update applicable agreements and notices to comply with the new requirements of the law.
