Clarifying Non-Compete Law in Virginia

In 2020, Virginia passed legislation creating prohibitory rules regarding noncompete agreements. This statute follows several other states which have created similar laws. In Virginia, employers cannot enforce noncompete agreements against low-wage employees. To fully understand and know what next steps to take for you or your business, let’s take a closer look.

This statute prohibits any agreement that “restrains, prohibits, or otherwise restricts an individual’s ability, following the termination of the individual’s employment, to compete with his former employer” (§ 40.1-28.7:8). This means there is potential to affect noncompete provisions in employment agreements, standalone restrictive covenants, and separation agreements. It does not prohibit confidentiality agreements and nondisclosure agreements.

What exactly is “low-wage”?

The term “low-wage employee” is a bit of a misnomer because it includes around half of VA employees. The statute defines low-wage employees as anyone who receives less than the average weekly wage per VA Employment Commission. This number will be updated quarterly and is subject to change but is currently approximately $59,124/year or $1,137/week. Low-wage employees also include “interns, students, apprentices, or trainees employed, with or without pay, at a trade or occupation in order to gain work or educational experience” (§ 40.1-28.7:8).

Another important aspect for employers is penalties for violation. A qualifying employee may sue an employer for violating or attempting to violate this law. The employee may receive “all appropriate relief” (§ 40.1-28.7:8) which may include:

  1. An injunction against the employer
  2. Liquidated damages
  3. Lost compensation
  4. Reasonable attorney’s fees and costs, including fees for expert witnesses

What employers can do:

Luckily, there are some measures that employers can take to avoid violation, provide a fair working environment, and still protect their professional interests. An easy first step is to post a copy or approved summary of the statute with other required employment notices. Employers must also take the time to review form non-compete agreements (and other restrictive covenants) to ensure compliance. Non-compete agreements for employees other than “low-wage employees” are enforceable if the employer can show that they are:

  1. Narrowly drafted to protect legitimate business interest
  2. Not unduly burdensome on the employee’s ability to earn a living
  3. Not against public policy

Due to other provisions of note not explored in this post, be sure to contact Gavin Law Offices for more information.  We continually monitor recent non-compete and trade secret legislation to better serve you and your business.

(This is not intended as legal advice. Contact a lawyer for assistance in your particular situation.)

 

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