A Virginia bill (Senate Bill 170) expands the protections currently afforded to employees under the state’s non-compete agreement law. Senate bill 170 seeks to amend and reenact § 40.1-28.7:8 of the Code of Virginia. As of early March 2026, the bill is currently awaiting action by Governor Spanberger. If signed, this legislation will introduce strict new requirements for the enforceability of non-compete agreements, specifically regarding discharged employees and severance benefits.
Key Changes to Non-Compete Enforceability
Key highlights include:
- Prohibition on Enforcing Against Discharged Employees. A non-compete agreement is unenforceable if an employer terminates an employee without providing severance benefits or other monetary compensation. The law does not clearly define what amount of severance would be considered sufficient.
- “For Cause” Exception. The amendment will not apply to employees that are terminated for cause.
- Mandatory Disclosure. Any severance benefits or monetary payments required to make a non-compete enforceable must be disclosed at the time the covenant is executed.
- Prospective Application: The amendment will only apply prospectively to agreements entered into after July 1, 2026; it will not apply retroactively.
- Expanded Private Right of Action. The bill removes the “low-wage” restriction for bringing a civil action, allowing any employee to sue a former employer who attempts to enforce an unlawful covenant not to compete.
Penalties and Legal Recourse
The legislation significantly increases the stakes for non-compliance:
- Civil Penalties: Employers found in violation of these non-compete provisions face a civil penalty of $10,000 for each violation.
- Court-Ordered Relief: Courts have the jurisdiction to void unlawful covenants and order relief, including liquidated damages, lost compensation, and reasonable attorney fees.
- Anti-Retaliation: Employers are prohibited from discriminating against or retaliating against any employee who brings a civil action to challenge a non-compete.
Next Steps for Employers
To prepare for these changes, which are slated to affect contracts entered into or renewed on or after July 1, 2026, employers should:
- Review Existing Non-Compete Templates. Ensure all future agreements include the necessary disclosures regarding severance benefits.
- Assess Discharge Procedures. Review “for cause” definitions in employment contracts to ensure they are robust and clearly defined.
- Update Required Postings. Ensure a copy of 40.1-28.7:8 of the Code of Virginia is posted alongside other required state and federal notices once the amendment becomes law.
- Consult with Legal Counsel. Seek advice to ensure that nondisclosure and trade secret agreements remain intact, as these are not limited by the new non-compete restrictions.
