Virginia Bans Non-Competes for Non-Exempt Employees
Effective July 1, 2025, Virginia has banned covenant not to compete agreements between employers and those employees classified as non-exempt under the Fair Labor Standards Act (FLSA). Under the law, a “covenant not to compete” is an agreement “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.”
Importantly, the law does not void non-compete agreements between non-exempt employees and employers that were executed before July 1, 2025. However, after July 1, employers who “enter into, enforce, or threaten to enforce a covenant not to compete” with a non-exempt employee will “be subject to a civil penalty of $10,000 for each violation,” and will also be liable to the employee for liquidated and other damages, lost compensation, and attorney fees.
As we described in our previous blog post, in July 2020 Virginia banned non-competes for “low-wage” employees and independent contractors. Under that law, “low-wage” workers are those who are earning less (from all earnings, including salary, bonuses, and commissions) than the median wage in Virginia, which in 2025 is calculated at $1,463.10 per week ($76,081.20 per year). A “low-wage” worker under that law excludes those “whose earnings are derived, in whole or predominant part, from sales commissions, incentives, or bonuses.”
A notable aspect of 2025 law is that under its definition sections, “A ‘covenant not to compete’ shall not restrict an employee from providing a service to a customer or client of the employer if the employee does not initiate contact with or solicit the customer or client.” This provision thus prohibits certain broad non-solicitation of customer agreements, in certain circumstances.
Since this law generally only prohibits non-competes against low-wage workers and non-exempt employees, it is fair to assume that the non-solicitation provision only prohibits such broad non-solicitation of customers agreements when they are used against low-wage workers and non-exempt employees.
However, it is also possible that a court would interpret this provision as applying to all non-solicitation of customer provisions, regardless of whether the affected employee is a low-wage or non-exempt employee.
Accordingly, Virginia employers who require their employees to sign non-solicitation of customer agreements should take this provision into consideration, even if their employees are not low-wage workers or non-exempt employees (and certainly if they are).
Do you need a review of your current agreements, or advice about how to respond to this new law? Contact us.
