The Virginia General Assembly convened on January 8, 2025 and adjourned sine die on February 22. During this session, elected officials introduced bills covering a wide range of subjects related to wages and other terms and conditions of employment, such as paid family and medical leave and changes in the minimum wage. Many bills died at various stages in the General Assembly or at the Governor’s desk by veto. However, a bill regarding restrictive covenants made it through the legislature and gained the Governor’s approval on March 24, 2025.
Virginia already prohibits employers from entering into, enforcing, or threatening to enforce non-compete agreements with any “low-wage employee,” which covers just about every employee whose average weekly earnings are less than the average weekly wage of the Commonwealth (currently $1,463.10 per week or $76,081.20 annually). Starting July 1, 2025, Virginia will expand the prohibition on non-compete agreements by modifying the definition of “low-wage employee” to include any employee who is entitled to overtime compensation under federal wage and hour law (i.e., non-exempt employees). Violations of this prohibition include a $10,000 civil penalty for each violation.
Restrictive covenants, including non-compete agreements, are generally disfavored in Virginia because they place a restraint on trade. However, a restrictive covenant is enforceable if it is narrowly drawn to protect a legitimate business interest, not unduly burdensome on an individual’s ability to earn a living, and reasonable in light of sound public policy. Balancing the interests of the parties and public policy requires an assessment of the nature or functions of the prohibited activities, the geographic scope of the restriction, and the duration of the agreement. Ambiguous or overly broad terms concerning function, geography, or duration risks rendering the entire restrictive covenant unenforceable and, in turn, risks losing protection of legitimate business interests. In addition, attempting to enforce an ambiguous or overbroad restrictive covenant could result in exposure to counterclaims and damages.
Employers and employees should review their restrictive covenants regularly to ensure compliance with and enforceability under Virginia law. Employers in particular should review their current non-compete agreements to ensure compliance with the modified definition of “low-wage employee” and avoid, among other things, civil penalties. In light of the July 1 addition of non-exempt employees to the definition of “low-wage employees,” Employers should also consider auditing employees’ duties and responsibilities to ensure they are correctly classified. Vasseghi Law Group attorneys are available to review and provide guidance in these matters.
