At the end of March, Governor Glenn Youngkin signed SB 1218, which amends Virginia’s non-compete ban for “low-wage” workers (the “Act”) to include non-exempt employees under the federal Fair Labor Standards Act (the “FLSA”).
The expanded restrictions take effect July 1, 2025.
What’s New?
As we discussed in more detail here, since July 2020, the Act has prohibited Virginia employers from entering into, or enforcing, non-competes with low-wage employees. Prior to the amendment, the Act defined “low-wage employees” as workers whose average weekly earnings were less than the average weekly wage of Virginia, which fluctuates annually and is determined by the Virginia Employment Commission. In 2025, Virginia’s average weekly wage is $1,463.10 per week, or approximately $76,081 annually. “Low-wage employees” also include interns, students, apprentices, trainees, and independent contractors compensated at an hourly rate that is less than Virginia’s median hourly wage for all occupations for the preceding year, as reported by the U.S. Bureau of Labor Statistics. However, employees whose compensation is derived “in whole or in predominant part” from sales commissions, incentives or bonuses are not covered by the law.
Effective July 1, 2025, “low-wage employees” will also include employees who are entitled to overtime pay under the FLSA for any hours worked in excess of 40 hours in any one workweek (“non-exempt employees”), regardless of their average weekly earnings. In other words, the amendment will extend Virginia’s non-compete restrictions to a significantly larger portion of the Commonwealth’s workforce.
A Few Reminders
The amendment does not significantly alter the other requirements under the Act regarding non-competes, including the general notice requirements and ability for a low-wage employee to institute a civil action. Although Virginia employers are not required to give specific notice of a noncompete to individual employees as some other states require, they must display a general notice that includes a copy of the Act in their workplaces. Failing to post a copy of the law or a summary approved by the Virginia Department of Labor and Industry (no such summary has been issued) can result in fines up to $1,000. Therefore, Virginia employers should update their posters to reflect the amended Act by July 1, 2025.
Employees are also still able to bring a civil action against employers or any other person that attempts to enforce an unlawful non-compete. Low-wage employees seeking relief are required to bring an action within two years of (i) the non-competes execution, (ii) the date the employee learned of the noncompete provision, (iii) the employee’s resignation or termination, or (iv) the employer’s action aiming to enforce the non-compete. Upon a successful employee action, courts may void unlawful non-compete agreements, order an injunction, and award lost compensation, liquidated damages, and reasonable attorneys’ fees and costs, along with a $10,000 civil penalty for each violation.
While the law creates steep penalties for non-competes, nothing within the legislation prevents an employer from requiring low-wage employees to enter into non-disclosure or confidentiality agreements.
Takeaways
The amendment emphasizes the importance for Virginia employers to correctly classify their employees as exempt or non-exempt under the FLSA. Additionally, the amendment does not apply retroactively, so it will not affect any non-competes with non-exempt employees that are entered into or renewed prior to July 1, 2025. Nevertheless, enforcing non-compete agreements with non-exempt employees may be more challenging after this summer, so Virginia employers may wish to consider renewing such agreements without non-compete provisions to ensure other provisions can be properly enforced.
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