Updated November 2021
Non Compete Law Changes in Virginia
While the rest of the world was focused on dealing with the implications of COVID-19, Virginia quietly passed it’s legal changes to whittle down already-disfavored non-competition laws.
Starting July 1, 2020, businesses may not “enter into, enforce, or threaten to enforce” a non-competition clause with any “low-wage employee.” The law broadly defines the colloquial non-competition clause as a “covenant not to compete,” which is further defined to include a “covenant or agreement, including a provision of a contract of employment, between an employer and employee that restrains, prohibits, or otherwise restricts an individual’s ability, following the termination of the individual’s employment, to compete with his former employer.”
A “low wage employee” is a worker making “less than the average weekly wage of the Commonwealth, or $1,204 per week (or $62,608 per year)– for now. This is also defined to include “interns, students, apprentices, or trainees employed . . . at a trade or occupation in order to gain work or educational experience.” In addition, independent contractors are considered “low-wage employees” if a business pays them less than the annual median hourly wage in the Commonwealth, currently $20.30 per hour (however, remember: it’s usually not advisable to have an IC sign a non-competition for a variety of reasons, and should only be used in very specific circumstances).
A carve out: low-wage employees do not include “any employee whose earnings are derived, in whole or in predominant part, from sales commissions, incentives, or bonuses.”
Given the effects of inflation, these amounts are subject to change annually This means businesses will need to monitor the wages of workers who might have signed noncompete provisions.
Employers are also required to post notices about this update with their other required posters.
What happens if businesses ignore this legal update?
First, they may get sued by the Employee. Employees may sue “any former employer or other person” for injunctive relief, liquidated damages, lost compensation, damages, and reasonable attorneys’ fees and costs.
In addition, the state may fine employers up to $10,000 for each violation.
What to do
Review your agreements with workers and make sure to remove non-compete language for low wage workers. Beef up other language concerning confidentiality and disclosures. Contact your attorney if you are unsure how this new law might affect your business. You can always email us to review your contract language for compliance.