PUBLICATIONS

The Virginia General Assembly has once again changed the rules for restrictive covenants. There are now fewer permissible uses for these types of agreements. Employers need to understand these new rules and legal pitfalls before entering into or attempting to enforce any restrictive covenant in Virginia.

Expansion of Virginia’s Prohibition on Noncompetes

The Original Statute

In 2020, Virginia enacted a law prohibiting entering into or enforcing noncompetition agreements for “low-wage” employees (Virginia Code § 40.1-27.8:8). The statute defines “low-wage” as any employee earning less than the median average weekly earnings for all Virginians as determined by the Virginia Department of Labor and Industry annually. The term specifically excludes employees who earn compensation primarily through commissions, incentives, or bonuses. As a result, the statute does not cover many sales employees. The 2026 low-wage threshold is $1,507.01 per week, or about $78,364.52 annually.

Section 40.1-27.8:8 defines a noncompetition agreement broadly as a provision of any agreement that restrains, prohibits, or restricts an employee’s ability to compete with their former employer following separation of employment. The statute provides both a private cause of action wherein employees can sue former employers for monetary damages and a mechanism to invalidate any prohibited noncompetition agreement.

The 2025 Amendment

In 2025, the legislature expanded the statute’s scope to include employees entitled to overtime compensation under the federal Fair Labor Standards Act (FLSA). This change means employees earning more than the median weekly wage in Virginia could still be considered “low-wage” under the statute unless they meet the requirements to be exempt from overtime compensation under the FLSA. With few exceptions, this means noncompetition agreements are generally prohibited for any hourly employee in Virginia.

The 2026 Amendments

The most recent change, effective July 1, 2026, further expanded the scope of the statute to virtually all healthcare professionals licensed or registered with Virginia’s Board of Medicine, Nursing, Counseling, Optometry, Psychology or Social Work. The only exception that the 2026 statute carves out for healthcare professionals is as part of a sale of a healthcare professional’s business. This definition does not cover all healthcare professionals, but it covers most.

The 2026 statute also created a new employer obligation to offer severance benefits to any employee discharged without cause. To enforce a noncompete agreement against an employee discharged without cause, employers must pay the employee a monetary severance.  If the employee voluntarily resigns or is terminated with cause, the noncompete provision remains enforceable even without a severance payment. These severance benefits must be disclosed at the time the employee enters into the noncompetition agreement. Virginia employers must therefore consider this severance issue before drafting any noncompete going forward.

Section 40.1-27.7:8 Impact on Nonsolicit and No-poach Agreements

Since § 40.1-27.8:8 was enacted, there has been some disagreement about how (or if) the statute restricts nonsolicitation or no-poach agreements.

While a noncompetition provision generally restricts an employee from competing against a former employer, a nonsolicitation agreement restricts an employee from soliciting or working with the former employer’s customers. A no-poach of employees agreement restricts an employee from recruiting other employees away from the former employer. 

A Nonsolicit is Not Necessarily a Noncompete

Section 40.1-27.8:8 has been interpreted in several different ways regarding its application to nonsolicits. On one hand, the definition of noncompete is very broad and arguably covers the concept of a nonsolicit. On the other hand, the statute also states “[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 the opinion of some practitioners, despite the broad definition of noncompete, this language indicates that an employer may restrict an employee from initiating contact with customers to solicit them.   

The Virginia Court of Appeals recently weighed in on this issue in the case of Sentry Force Security, LLC v. Barrera. In that case, a low-wage employee signed an agreement prohibiting him from soliciting the employer’s customers after his employment ended.   

The Court of Appeals conducted a detailed analysis of the statute’s language and held that § 40.1-28.7:8 does not prohibit nonsolicits limited to restricting employees from initiating contact. The Court determined that a nonsolicit is separate and distinct from a noncompete because the statute contains the specific language reference when nonsolicits may be permitted.

A No-poach of Employees is a Noncompete

Interestingly, the Sentry Force Court held that § 40.1-28.7:8 still applies to no-poach of employee agreements. The Court held that the employer could not enforce a no-poach agreement against a low-wage worker because the statute did not specifically reference no-poach provisions as it did for nonsolicits. 

The general framework for how the Sentry Force Court views § 40.1-28.7:8 seems to be as follows:

Sentry Force Security, LLC is currently pending an appeal to the Supreme Court of Virginia.

Conclusion

With all these changes, the traditional common law framework for determining the enforceability of restrictive covenants remains. As a starting place, the restrictive covenant must not violate Virginia public policy and must not unnecessarily prevent an employee from earning a living. If the provision passes those hurdles, it must be narrowly tailored to protect only legitimate business interests, and not be overly broad in functional restriction, geographic scope, or duration. Now, in addition to the common law assessment, employers need to ensure compliance with Va. Code § 40.1-27.7:8.