Virginia Amends Threshold Compensation Level for Ban on Non-Competes for “Low-Wage Employees” | Littler

On March 24, 2025, Governor Glenn Youngkin signed into law legislation that amends the threshold compensation level of a “low-wage employee” with whom the Commonwealth restricts employers from entering into agreements not to compete. Virginia currently prohibits employers from entering into, enforcing, or threatening to enforce non-compete agreements against “low-wage employees,” who were previously defined under the state’s non-compete statute as individuals who earn less than the Commonwealth’s average weekly wage. In 2025, that amount is $1,463.10 per week (which equates to an annual salary of $76,081).¹ The new law amends the definition of “low-wage employee” to include employees who, regardless of their average weekly earnings, are entitled to overtime compensation under federal law for any hours worked in excess of 40 hours in any one workweek. In other words, this amended definition now expands the definition of a “low-wage employee” to include those who are deemed “non-exempt” from the federal Fair Labor Standards Act (FLSA). This new law will go into effect on July 1, 2025.

Notably, the FLSA’s minimum salary threshold for exempt employees is $1,128 per week (an annual salary of $58,656) which is lower than the Commonwealth’s average weekly wage. Thus, the practical effect of this new law is that there is now a smaller pool of employees with whom employers are permitted to use and enforce covenants not to compete in Virginia.

Employers in Virginia that use or are considering using non-compete agreements with their workforce should evaluate their existing agreements and assess whether employees now fall within the definition of a “low-wage employee.” Employers should also remain aware of the parameters of Virginia’s ban on noncompete law that have not changed, including that:

• Employees have the right to file suit to invalidate a legally prohibited restrictive covenant, and if they prevail, the employee is entitled to be paid liquidated damages as well as lost wages, benefits, and attorney’s fees. Additionally, employers can be assessed a civil monetary of up to $10,000 per violation.

• Virginia does not prevent employers from utilizing nondisclosure agreements that are “intended to prohibit the taking, misappropriating, threating to misappropriate, or sharing of certain information, including trade secrets . . . and proprietary or confidential information.” Va. Code § 40.1-28.7:8(C). Employers should thoroughly assess the necessary protections when creating and implementing confidentiality, nondisclosure, and proprietary information protection agreements with employees.

• Unlike some other states (e.g. Colorado, California), Virginia does not require employers to notify individual employees about the validity or enforceability of their non-compete agreements. However, Virginia employers must display a general notice that includes either a copy of Virginia Code § 40.1-28.7:8 (which outlines the non-compete ban for “low wage” employees), or an approved summary of this Code section provided by the Virginia Department of Labor and Industry. This notice must be posted alongside other mandatory federal and state employment law postings.

In light of this new legislation, Virginia employers should promptly review and update their non-compete agreements to ensure compliance, and consider consulting legal counsel to navigate these changes effectively.

Footnotes

^​1 This prohibition applies only to non-compete agreements entered into on or after July 1, 2020.