Under SB 170, a noncompete is not enforceable if an employer discharges any employee—not just a low-wage employee—without cause and without providing severance benefits or other monetary payment.
On April 13, 2026, Governor Abigail Spanberger signed SB 170, which amends Virginia Code Section 40.1-28.7:8, effective July 1, 2026, to restrict employers from enforcing a noncompete against an employee discharged without “cause” who does not receive severance or other monetary payment.
SB 170 builds on Virginia’s existing noncompete law. Virginia first prohibited noncompetes for “low-wage” workers in 2020 and required employers to post a copy of the law or an approved summary in the same location as other required employee notices. As we detailed in our prior Alert, in 2025, the Legislature expanded the definition of “low-wage employee” to also include all employees entitled to overtime under the Fair Labor Standards Act (FLSA)—effectively covering most nonexempt employees. SB 170 retains these prior limitations and further curtails the use of noncompetes, restricting when employers can enforce a noncompete against a discharged employee.
How Does the Amendment Affect Discharged Employees?
Under SB 170, a noncompete is not enforceable if an employer discharges any employee—not just a low-wage employee—without cause and without providing severance benefits or other monetary payment.
SB 170 does not set a minimum threshold for the amount of “severance benefits or other monetary payment” an employer must provide to an employee discharged without cause. Whatever severance or payment the employer provides must be disclosed in the agreement when the noncompete is signed.
SB 170 also does not define “cause,” which will instead be determined by the courts.
When Does the Amendment Take Effect?
SB 170 will take effect on July 1, 2026. It would apply only to contracts entered into, amended or renewed on or after July 1, 2026. It does not apply retroactively. Noncompetes signed before that date remain governed by existing law.
Which Types of Agreements Are Covered by the Law?
Existing law and the new amendment cover any “covenant not to compete,” defined as a “covenant or agreement, including a provision of a contract of employment—that restrains, prohibits, or otherwise restricts an individual’s ability, following termination of the individual’s employment, to compete with this former employer.”
What Types of Agreements Are Not Covered?
The existing and amended law do not limit nondisclosure agreements intended to prohibit the “taking, misappropriating, threating to misappropriate, or sharing of certain information, including trade secrets, as defined in Section 59.1-336, and proprietary or confidential information.”
Does the Amended Law Retain Other Existing Restrictions on Noncompetes?
Yes. Such restrictions include:
Notice Requirement
The law continues to require that “[e]very employer shall post a copy of this section or a summary approved by the Department in the same location where other employee notices required by state or federal law are posted.” An employer that fails to post a copy of the law or an approved summary of the law is subject to civil penalties. After the amendment takes effect, the posted notice must conform with the new law.
Low-Wage Employees
The existing prohibition on “covenants not to compete” with low-wage employees remains unchanged. A “low-wage employee” continues to include:
- Workers earning less than the commonwealth’s average weekly wage—currently $1,501 per week, or $78,364 annually in 2026;
- Employees entitled to overtime under the FLSA; and
- Interns, apprentices and certain independent contractors.
Workers whose earnings are primarily derived from sales commissions, incentives or bonuses remain excluded from the low-wage employee definition.
Customer Limitations
The existing and amended law provide that 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 prohibition appears to apply to all employees, regardless of whether they meet the “low-wage” definition or are discharged. In other words, employers may enforce a covenant that bars an employee from initiating contact with or soliciting the employer’s customers. But employers may not enforce a covenant that bars an employee from servicing a customer who independently approaches the employee.
Employee Nonsolicitation Limitations
In Sentry Force Security, LLC v. Barrera, 2026 WL 200848, at *10 (Va. Ct. App. Jan. 27, 2026) (unpublished), the Virginia Court of Appeals held that an employee nonsolicitation restriction is a “covenant not to compete” under Section 40.1-28.7:8. The court reasoned that the statute’s narrowing language—which permits employers to bar employees from soliciting the employer’s “customers or clients”—does not provide a separate exemption for restrictions on soliciting the employer’s other employees. An agreement barring a former employee from recruiting co-workers thus falls within the statute’s broad definition of “covenant not to compete” and cannot be enforced against a low-wage employee. Because SB 170 does not change the definition of “covenant not to compete,” the court’s interpretation is likely to carry forward once the new law takes effect, impacting discharged employees.
What Are the Consequences If an Employer Violates the Law?
SB 170 broadens the existing private right of action to allow any employee—not just a low-wage employee—to bring a civil action against an employer that attempts to enforce a noncompete agreement in violation of the law.
The court may void the noncompete, enjoin enforcement and award liquidated damages, lost compensation, damages and reasonable attorneys’ fees and costs.
No employer may discharge, threaten or otherwise discriminate or retaliate against an employee for bringing a civil action under the statute.
An employer that violates the low-wage restriction or the discharged employee restriction faces a $10,000 civil penalty per violation. The penalty is payable to the Commissioner of Labor and Industry for deposit in the general fund.
If the court finds a violation, the plaintiff may also recover reasonable costs, including expert witness fees and attorneys’ fees.
Failing to post the law or an approved summary triggers a written warning for the first offense, a fine of up to $250 for the second and up to $1,000 for each later violation.
Can the Law Be Circumvented by Applying Another State’s Law Under Contract?
The law still does not address whether an employer may include, as a condition of employment, a requirement to apply a different state’s law or to adjudicate outside Virginia.
What This Means for Employers
SB 170 is a targeted but meaningful expansion of Virginia’s noncompete restrictions. Employers with Virginia-based employees should take the following steps:
Update Noncompetes to Address Severance or Other Monetary Payment
Any noncompete entered into, amended or renewed on or after July 1, 2026, must disclose the severance or payment the employer will provide to enforce the provisions upon a discharge without cause. SB 170 does not set a minimum severance amount. Employers should work with counsel to determine an appropriate level of severance that supports enforceability.
Consider Defining “Cause” in Noncompetes
SB 170 does not define “cause.” Employers should consider defining the term in the noncompete agreement itself to reduce ambiguity and litigation risk.
Reassess Restrictive Covenant Strategies
Employers may need to rely more on confidentiality agreements, trade secret protections and nonsolicitation provisions—particularly for employees who might be discharged in a restructuring or layoff.
Confirm Employee Classifications
Remember that Virginia already prohibits noncompetes with low-wage employees, which now includes most nonexempt employees. Misclassification potentially exposes employers to both FLSA liability and noncompete penalties.
Update Workplace Posters
Employers must update their posted notice of Virginia’s noncompete law to reflect the amended law or face penalties.
For More Information
If you have any questions about this Alert, please contact Shannon Hampton Sutherland, Lawrence H. Pockers, Ryan S. Crawford, any of the attorneys in our Trade Secrets and Non-Compete Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.