Virginia Set to Expand Restrictions on Employee Non Competes

Article by Nicholas Hopkins, Associate

Virginia is set to expand its limitation of employee non‑compete agreements (“non-competes”). SB 170 has passed both chambers of the General Assembly and is expected to be signed by Governor Abigail Spanberger. Once enacted, the law will render post‑employment non‑competes unenforceable if an employer terminates an employee without cause and does not provide severance or other monetary compensation.

Virginia’s restrictions on non‑competes had previously applied only to non‑exempt workers and employees earning less than the state’s Average Weekly Wage. SB 170 expands the reach of these restrictions: it applies to all employees at all compensation levels, including executives, and imposes a new requirement that employers provide “severance benefits or other monetary payment” for any non‑compete to remain enforceable following a termination without cause.

Key Aspects of SB 170

If signed, SB 170 will take effect on July 1, 2026 and will apply to all non‑competes entered into, amended, or renewed on or after that date. The law:

• Applies broadly to all employers with any employees in Virginia.
• Covers all employees, regardless of seniority, compensation, or role.
• Defines a covered non‑compete to include not only restrictions on post‑employment competitive activity but also restrictions preventing a former employee from serving clients they did not “initiate contact with or solicit.”
• Conditions enforceability of the non-compete on the employer providing severance or other monetary payment when terminating an employee without cause.
• Creates a private right of action, permits recovery of damages and attorney fees, authorizes civil penalties up to $10,000 per violation, prohibits retaliation, and requires employers to post a notice summarizing the law.

The statute leaves important concepts undefined, such as what constitutes “for cause” or “without cause” and what amount of severance or monetary compensation is sufficient. The devil will be in the details: this lack of specificity will require further regulatory or judicial clarification.

Practical Considerations for Employers

For multistate employers operating in Virginia, SB 170 adds another layer of complexity to a fragmented compliance landscape. This law reflects a nationwide trend away from the enforceability of non-competes for all employees, at all compensation levels. Employers should think through separation procedures, documentation, and agreements well in advance of July 1, 2026, including:

• Evaluating non‑compete strategies for executives and other high‑level personnel, as enforceability may depend on offering severance or other consideration.
• Reviewing non‑compete, non‑solicitation, and confidentiality provisions to avoid inadvertently triggering SB 170’s broad definition of a “covenant not to compete.”
• Strengthening confidentiality and trade secret protections, which will become even more important as non‑competes become more difficult to enforce.
• Drafting with care so post-employment restrictions are not voided by Virginia’s “red‑pencil” rule, under which Virginia courts simply strike, rather than modify, unenforceable restrictive covenant provisions.
• Considering choice of law provisions for employee severance agreements. Multistate employers might elect to have employee severance agreements be interpreted under the laws of a state other than Virginia, if they are able.

Employers should begin reviewing and updating their separation procedures, particularly severance agreements and post-separation restrictive covenants. Early planning will help ensure future agreements remain enforceable and avoid costly compliance missteps once this new law takes effect.