Virginia Legislation Update: Noncompete Agreements
The Virginia General Assembly has passed two bills about noncompete agreements that, unless amended or vetoed by the Governor, will take effect on July 1, 2026. Neither bill would invalidate agreements entered into before their effective dates.
As a reminder, noncompete agreements are already unenforceable under Virginia law as applied to (i) employees making less than the average wage in Virginia (calculated at $1,507.01 per week in 2026, or about $78,579.88 per year), and (ii) employees entitled to overtime pay under the federal Fair Labor Standards Act.
Restrictions on Noncompete Agreements with Healthcare Professionals
One of the bills passed by the Virginia General Assembly (SB128 / HB627) is fairly straightforward: it essentially expands the groups of employees for whom noncompete agreements are unenforceable. Specifically, the bill would make unenforceable any noncompete agreement entered into with any person licensed, registered, or certified by any of the following Virginia Health Regulatory Boards: (1) the Board of Medicine, (2) the Board of Nursing, (3) the Board of Counseling, (4) the Board of Optometry, (5) the Board of Psychology, or (6) the Board of Social Work. An exception would exist for health care professionals who enter into a noncompete agreement as part of a sale of business, though particular criteria would need to be satisfied in those circumstances.
Restrictions on Noncompete Agreements with Employees Terminated without Cause
The second bill (SB170) is not as straightforward. It would make noncompete agreements unenforceable when each of these two criteria are met: (i) the employee is terminated without “cause;” and (ii) the employee is not provided with severance benefits that are disclosed upon the execution of the noncompete.
Quite notably, “cause” is left undefined in the bill. However, an examination of the bill’s history provides clues as to how the legislature may intend the term to be defined. Originally, SB170 simply stated that a noncompete agreement would be unenforceable whenever the employee was terminated by the employer (as opposed to resigning), unless the employer provided the employee with certain garden leave benefits.
Later, SB170 was amended when another bill—SB569—was incorporated into it. Before that incorporation, SB569 provided that noncompete agreements would be unenforceable when the employer terminated the employee, except if the termination was “due to the employee’s inadequate job performance or misconduct.”
Given this legislative history, it is possible that if SB170 passes as is, courts could find that an employee is only terminated for cause under the bill when they are terminated for poor performance or misconduct. Under such circumstances, employees terminated for economic reasons (i.e., laid off) may not be considered to be terminated “for cause.” If the bill passes, we will have to wait to see how the courts interpret the terms “inadequate job performance” and “misconduct.”
Based on the plain reading of the bill, for any employee terminated without “cause,” it appears that a noncompete agreement could only be enforced against them if: (i) upon the execution of the noncompete agreement, the employee was informed of severance benefits they would be provided if they were terminated without cause, and (ii) upon termination, the employer actually provides such severance benefits. Thus, for employers who wish to keep open the option of enforcing noncompete agreements against employees who are terminated without cause (e.g., laid off), it may be worth considering a provision in their noncompete agreements stating that if the employee is terminated without cause (as that term is used in SB170), then they will be provided with some defined severance benefits.
Another notable aspect of SB170 is that there is no stated minimum to the value of the severance benefits that must be provided to an employee terminated without cause to make their non-compete enforceable. However, we would not recommend that employers interested in enforcing noncompete agreements against employees terminated without cause provide only a nominal or symbolic amount of severance benefits (e.g., one dollar). In Virginia, nominal consideration can be considered insufficient to make a binding contract. See Sfreddo v. Sfreddo, 59 Va. App. 471, 489-92 (2012).
Employer Takeaways:
These bills are not yet law. After the General Assembly concludes its initial session on March 14, 2026, it will reconvene for about three days, starting on April 22, 2026, to consider any amendments to legislation proposed by the Governor. Accordingly, we should know by around April 26, 2026, whether these bills will become law, either as-is or with some amendments.
Nevertheless, Virginia employers who have existing noncompete agreements with healthcare professionals (including licensed social workers) may wish to have an experienced employment lawyer review their agreements to ensure that they are not overly broad or otherwise unreasonable, because the time employers have for amending such agreements to make them enforceable may be ending soon.
Regarding SB 170, employers may wish to wait until the end of April 2026 before deciding on how to proceed with amending noncompete agreements going forward. If the bill becomes law as-is, then employers will at that point have two months (until July 1, 2026) to determine: (i) whether they would want to attempt to enforce a noncompete agreement against an employee terminated without cause (e.g., laid off), and (ii) if so, what amount of severance benefits they would be willing to offer in the noncompete agreement in the event the employee is terminated without cause.
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