Amendment to Virginia Law Prohibits Noncompetes Against Nonexempt Employees

Quick Hits

• On March 24, 2025, Virginia Governor Glenn Youngkin signed SB128 into law, which significantly expands the existing scope of protection to low-wage employees against the enforcement of noncompete agreements.
• Starting on July 1, 2025, covenants not to compete will be prohibited against any employee who qualifies as a “low-wage employee,” meaning any employee who (i) earns less than the average weekly wage in Virginia (currently $1,463.10 weekly or $76,081 annually) or (ii) is entitled to overtime compensation under the FLSA.
• Employers that enter into, enforce, or threaten to enforce a covenant not to compete against a low-wage employee could be subject to injunctive relief, the payment of damages (including liquidated damages), attorneys’ fees, costs, and a civil penalty of $10,000 per violation.
• Covenants not to compete that were entered into (or renewed) before July 1, 2025, are not affected by the changes in the law.

Summary of Virginia’s Amended Noncompete Law

Virginia’s decision to ban noncompete agreements against low-wage employees is not entirely new. As we previously reported, Virginia enacted a law in 2020 that prohibits covenants not to compete against “low-wage employees.” Until recently, the term “low-wage employee” had been defined as an employee whose average weekly earnings are less than the average weekly wage in Virginia. In 2020, the salary threshold for a “low-wage employee” was approximately $62,000 per year. By 2025, that amount had increased to $76,081 per year.

In an effort to expand the protection available to Virginia employees, the amended law still prohibits noncompetes against any employee who falls below the salary threshold, but also includes any employee “who, regardless of his average weekly earnings, is entitled to overtime compensation under the provisions of 29 U.S.C. § 207 for any hours worked in excess of 40 hours in any one workweek.” In other words, starting July 1, 2025, employers can no longer enter into or attempt to enforce noncompete agreements with employees classified as nonexempt under the FLSA.

Fortunately for employers, the amendment does not invalidate or otherwise affect covenants not to compete that were entered into (or renewed) prior to July 1, 2025. As such, employers have a narrow window of time to consider entering into noncompete agreements with nonexempt workers, provided those workers earn more than $1,463.10 weekly or $76,081 annually. Furthermore, the new law allows for the continued use of nondisclosure agreements if they are designed to “prohibit the taking, misappropriating, threatening to misappropriate, or sharing of certain information to which an employee has access, including trade secrets” and confidential or proprietary information.

Key Takeaways

Starting July 1, 2025, Virginia employers cannot enter into or attempt to enforce a covenant not to compete with any workers who are (or should be) classified as nonexempt under the FLSA. Thus, the amended law will offer protection to a significantly larger population of employees than in the past.

Employers may want to consider entering into noncompete agreements now, as the amended law does not apply to covenants not to compete entered into before July 1, 2025, provided that the employee earns more than the average weekly wage in Virginia.

Employers that neglect to carefully evaluate employees’ exempt versus nonexempt status under the FLSA for any agreements entered into after July 1, 2025, could face stiff penalties of $10,000 per violation and potential civil actions from employees.

Ogletree Deakins’ Unfair Competition and Trade Secrets Practice Group and Richmond office will continue to monitor developments and will provide updates on the Unfair Competition and Trade Secrets and Virginia blogs as additional information becomes available.

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