New Virginia Non-Compete Law

Effective July 1, 2020, Va. Code § 40.1-28.7:7 prohibits employers from entering into, enforcing, or threatening to enforce non-compete agreements with “low wage” workers. The law also adds new restrictions on allowable provisions in anti-solicitation provisions but does not limit an employer’s right to prohibit the disclosure of confidential and proprietary information or trade secrets.

Definition of “Low Wage Employee”

The new non-compete restrictions apply to any “low-wage employee,” which is defined as a person who earns less than the average weekly wage in the Commonwealth. On July 1st, that figure will be $1,137 per week, or $59,124 per year. The new law also bans non-compete agreements for independent contractors compensated at an hourly rate that is less than the median hourly wage in the Commonwealth – currently $20.30 per hour.

Exceptions to New Law

The law carves out a few exceptions. First, the law does not apply to employees whose earnings are largely derived from sales commissions, incentives, or bonuses. The law also permits agreements with “low-wage employees” that would ban the employee from soliciting customers, so long as the non-solicitation agreement does not prohibit the former employee from doing work for the customer if the customer reaches out to the former employee first. Third, the law does not prohibit non-disclosure agreements. Finally, the law only applies to Agreements that are entered into on or after July 1, 2020, although it may well be that courts refuse to enforce non-compete agreements entered into prior to July 1st on public policy grounds.

Penalties and Compliance

The law comes equipped with stiff penalties. An employer who violates the law may be assessed a civil penalty of $10,000 per violation. The law also provides employees with a private right of action to sue in Circuit Court against an employer that attempts to enforce a non-compete in violation of the new law. Finally, employers are required to post notice of the new law in the workplace. The Virginia Department of Labor and Industry has not yet provided such a notice.

A summary of this requirement can be found here, and you should post a copy of this summary until VDOLI publishes an updated notice.

Should you have any questions about Virginia’s new non-compete law, please contact either Josh Jewett (jjewett@piercemccoy.com) or Aaron Siegrist (asiegrist@piercemccoy.com).