Virginia Legislature Expands Restrictions on Noncompete Agreements

Employee restrictive covenants are governed in Virginia in part by statute. See Va. Code Ann. § 40.1-28.7:8. In April, Virginia Governor Abigail Spanberger signed into law two important amendments to this statute. 

First, Virginia Senate Bill 170 (SB 170) prevents employers from enforcing any noncompete where the employee is terminated without cause and there is no provision for severance benefits or other monetary compensation that were disclosed when the noncompete was signed. Second, Virginia House Bill 627 (HB 627) makes noncompete agreements for health care professionals unenforceable, subject to limited exceptions. 

Both amendments are effective as of July 1. The amendments apply only prospectively to agreements entered into, amended, or renewed on or after that date. 

Background

Virginia’s Existing Noncompete Framework

Currently, Virginia law prohibits noncompete agreements only for statutorily defined low-wage employees and employees classified as nonexempt under the Fair Labor Standards Act. In January, the Virginia Court of Appeals further clarified the scope of the existing statute in Sentry Force Security, LLC v. Barrera, holding that customer non-solicitation provisions that preclude employees from soliciting customers do not fall within the statutory definition of noncompete covenants and, thus, are enforceable to include against low-wage employees. The court distinguished customer non-solicitation provisions from employee non-solicitation agreements, noting that the statute’s limiting language as to customer non-solicitation provisions does not extend to employee non-solicitation provisions, and as such, they do fall within the statutory definition of noncompete covenants unenforceable against low-wage employees. 

Statutory Information 

Va. Code Ann. § 40.1-28.7:8, as amended by Virginia Senate Bill 170 (SB 170) and Virginia House Bill 627

Enacted by: Governor Abigail Spanberger 

Effective Date: July 1, 2026

Analysis and Outcome

Key Provisions of the Amendments 

Noncompete Restrictions for Without-Cause Terminations (SB 170) 

SB 170 expands noncompete restrictions well beyond low-wage workers. The centerpiece of SB 170 is the new requirement of a severance benefit or other monetary payment for the enforcement of a noncompete where the termination is not for cause. Under the amendment, a noncompete agreement is unenforceable if the employer discharges an employee without cause and does not provide them severance pay or other monetary compensation. Critically, under this amendment, the severance benefit or other monetary payment must have been disclosed to the employee at the time the noncompete agreement is signed. An employer may not offer monetary consideration after the fact to salvage enforceability of a noncompete following a without-cause termination.

SB 170 also does not define the term “cause,” leaving employers with discretion (but also legal uncertainty) in making that distinction. Nor does the amendment specify the amount of severance benefits or other monetary payment required to satisfy the statutory requirement. As to the payment requirement, it is perhaps worth noting that under the Massachusetts statute, which requires either a garden leave clause or “other mutually agreed upon consideration” to support the noncompete, courts have determined stock options to be sufficient consideration. Cynosure LLC. v. Reveal Lasers LLC, No. 22-cv-11176-PBS, 2022 WL 18033055, *1, *9 (D. Mass. 2022).

Governor Spanberger signed SB 170 into law on April 13, and the amendments take effect July 1. SB 170 applies only to noncompete agreements entered into, amended, or renewed on or after July 1. Virginia’s amendments contrast in this regard with the newly enacted amendments in Washington, Engrossed Substitute House Bill 1155 (ESHB 1155), by not applying retroactively; agreements executed before July 1 are not affected.

Noncompete Restrictions for Health Care Workers (HB 627)

HB 627, a companion to SB 170, passed on April 22. HB 627 prohibits employers from entering into, enforcing, or threatening to enforce noncompete agreements with health care professionals. 

This amendment applies broadly to individuals licensed, registered, or certified by the Board of Medicine, Nursing, Counseling, Optometry, Psychology, or Social Work. Importantly, the amendment only considers whether an employee is licensed; it does not consider whether an employee occupies a position that requires a license or whether the employee seeks competitive employment in a role that would require one. It is therefore unclear whether the amendment would apply to health care professionals who are licensed but are employed in a business or executive role that does not require a license. 

The health care noncompete amendment includes two notable exceptions. First, noncompete agreements remain enforceable if they are entered into in connection with the sale of a business. This sale-of-business exception, however, does not specify an ownership threshold requirement to qualify for the carve-out. This is another distinction between Virginia’s amendment and the newly enacted amendments in Washington, which specifies a 1% ownership requirement for its sale-of-business exception. SeeWashington ESHB 1155. 

Second, employers are able to require departing health care professionals who have been employed for fewer than five years to repay all or a prorated portion of recruiting, education, or training expenses. Employers may also continue to include non-solicitation provisions in employment agreements for customers with whom the employee had material contact during his or her employment, so long as the non-solicitation provision restricts solicitation for the same or similar products and services to those provided by the employer. 

Available Remedies to Employees 

An employee may bring a private right of action against any former employer or other person that attempts to enforce a noncompete in violation of the amendments. A robust set of remedies are available to employees. 

• Injunctive Relief: A court may void the unlawful noncompete agreement and issue an injunction against its enforcement. 

• Actual Damages: The employee may recover lost compensation and other actual damages suffered because of the employer’s attempt to enforce the agreement. 

• Liquidated Damages: The statute authorizes an award of liquidated damages, which serves as an additional penalty beyond the employee’s actual losses.

• Reasonable Attorneys’ Fees and Costs: A prevailing employee may recover attorneys’ fees and costs incurred in bringing the action. 

In addition to the remedies available to an individual employee, an employer found in violation of the amendments is subject to a civil penalty of $10,000 per violation. 

Why It Matters

Virginia’s new amendments reflect the continuing national trend toward restricting the use of noncompete agreements, and its practical implications are substantial. The severance requirement for terminations without cause is a significant change for employers who rely on noncompete covenants to protect their previously recognized business interests. Additionally, the absence of (1) a statutory definition for “cause” and (2) an amount of required severance or other monetary payment creates some uncertainty that employers must navigate carefully. Careful thought will need to be given to the extent to which noncompete agreements entered into after July 1 contain their own contract definition of “cause” and monetary payments sufficient to support enforceability. 

For employers in the health care industry, the near-categorical ban on noncompetes for health care professionals requires immediate attention and a reevaluation of retention and competitive protection strategies.

Finally, because the amendments apply only to agreements entered into, amended, or renewed on or after July 1, employers have a narrow window to consider whether current employees should execute restrictive covenants under the existing framework before the new requirements take effect. Employers should conduct a comprehensive audit of their existing restrictive covenant agreements, update templates, and align termination practices with the new statutory requirements before the July 1 effective date.