Virginia and Wyoming are the latest states to pass laws limiting the circumstances in which noncompetes may be enforced, effective July 1, 2025.
While early signs indicate that the Trump administration may pull back the prior administration’s move to curtail noncompetes at the federal level (see our earlier Alert), Virginia and Wyoming are the latest states to pass laws limiting the circumstances in which noncompetes may be enforced, effective July 1, 2025.
Virginia
Virginia’s Senate Bill 1218 amends Virginia Code § 40.1-28.7:8 to expand the commonwealth’s existing noncompete restrictions to a broader group of employees.
When Does the Law Take Effect?
The new law takes effect July 1, 2025, and will only govern agreements that are entered into on or after that date―i.e., the law does not apply to noncompetes entered into prior to July 1, 2025. However, the existing law―which applies to a more narrow subset of employees―covers noncompetes entered into on or after July 1, 2020.
Who Is Covered by the Law?
Since July 1, 2020, Virginia has prohibited employers from entering into or enforcing a “covenant not to compete” with “low-wage employees.” This includes workers earning less than the average weekly wage—approximately $76,000 annually in 2025—as well as certain interns, apprentices and independent contractors. Workers whose earnings are primarily derived from sales commissions, incentives or bonuses are explicitly excluded from the definition.
Senate Bill 1218 expands the definition of “low-wage employee” to also include employees who are “entitled to compensation under the provisions of 29 U.S.C. § 207 for any hours worked in excess of 40 hours in any one workweek.” In essence, SB 1218 expands the prohibitions on enforcement of noncompetes to also cover employees that are classified as “nonexempt” under the federal Fair Labor Standards Act in addition to those employees covered by the existing definition.
Which Types of Agreements Are Covered?
The existing and amended statute prohibits employers from entering into or enforcing a “covenant not to compete” with a “low-wage employee.” A “covenant not to compete” is defined as:
[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.
The existing and amended statute goes on to 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. It suggests that, for all employees, (1) a covenant that restricts an employee from servicing a customer when the employee is the one initiating contact with or otherwise soliciting the customer is permitted, and (2) on the other hand, a covenant that prohibits an employee from servicing a customer the employee does not initiate contact with or otherwise solicit is prohibited.
The existing and amended statute explicitly permits nondisclosure agreements intended to prohibit the “taking, misappropriating, threating to misappropriate, or sharing of certain information, including trade secrets, as defined in § 59.1-336, and proprietary or confidential information.”
Are There Any Exceptions to the Law?
The amendment does not apply to noncompetes entered into or renewed prior to July 1, 2025.
Can the Law Be Circumvented by Applying Another State’s Law Under Contract?
The answer appears to be “yes,” as the Virginia law 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 Are the Consequences If an Employer Violates the Law?
An employee may bring a civil action in a court of competent jurisdiction against any former employer or other person that attempts to enforce a noncompete against such employee in violation of the law. In such an action, the court has jurisdiction to void the noncompete and to order all appropriate relief, “including enjoining the conduct of any person or employer, ordering payment of liquidated damages, and awarding lost compensation, damages, and reasonable attorney fees and costs." If the court finds a violation of the law, the plaintiff is entitled to recover reasonable costs, including costs and reasonable fees for expert witnesses, and attorney’s fees from the former employer or other person who attempts to enforce the noncompete against such plaintiff.
The law also states, “No employer may discharge, threaten, or otherwise discriminate or retaliate against a low-wage employee for bringing a civil action pursuant to this section.”
An employer that violates the law, as determined by the state Commissioner of Labor and Industry, “shall be subject to a civil penalty of $10,000 for each violation. Civil penalties owed under this subsection shall be paid to the Commissioner for deposit in the general fund.”
Finally, 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:
[S]hall be issued by the Department a written warning for the first violation, shall be subject to a civil penalty not to exceed $250 for a second violation, and shall be subject to a civil penalty not to exceed $1,000 for a third and each subsequent violation as determined by the Commissioner.
What This Means for Employers
Companies with Virginia-based employees or independent contractors should engage counsel to reevaluate their current and prospective restrictive covenant agreements and exit procedures.
Wyoming
When Does the Law Take Effect?
The law takes effect July 1, 2025, and will only govern agreements that are entered into on or after that date―i.e., the law does not apply to covenants not to compete entered into prior to July 1, 2025.
Who Is Covered by the Law?
When it becomes effective, the statute, W.S. 1‑23‑108, will render void “[a]ny covenant not to compete that restricts the right of any person to receive compensation for performance of skilled or unskilled labor[.]”
Which Types of Agreements Are Covered?
The new law prohibits the use of any noncompete that does not meet one of the statutory exceptions. The Wyoming statute is silent on the issue of whether customer nonsolicitation provisions are excluded or covered.
Are There Any Exceptions to the Law?
Yes. The statute contains the following stated exceptions:
- Noncompetes “contained in a contract for the purchase and sale of a business or the assets of a business”;
- Noncompetes to the extent they protect “trade secrets” as defined by W.S. 6‑3‑501(a)(xi);
- Any provisions requiring the repayment of expenses for relocation, education or training of an employee. However, recovery is limited to: (A) 100 percent of costs for employees working less than two years, (B) 66 percent of costs for employees working between two and less than three years and (C) 33 percent of costs for employees working for between three and less than four years, with zero cost recovery after four years of employment;
- Noncompetes for “[e]xecutive and management personnel and officers and employees who constitute professional staff to executive and management personnel.”
Wyoming’s new statute does not define “executive and management personnel” or “professional staff.” The exception for “[e]xecutive and management personnel and officers and employees who constitute professional staff to executive and management personnel” mirrors that which existed under Colorado’s prior (and since amended) noncompete statute. In determining whether an individual fell within the “management personnel” exception under the prior Colorado statute, Colorado courts considered, among other things, whether an employee was “in charge” of the business and acted in an unsupervised manner, whether they had increased access to secret information (when compared to lower-level employees), and the level of compensation within a company. See, e.g., Management Recruiters v. Miller, 762 P.2d 763 (Colo. Ct. App. 1988); Atmel Corp. v. Vitesse Semiconductor Corp., 30 P.3d 789, 795 (Colo. Ct. App. 2001); DISH Network Corp. v. Altomari, 224 P.3d 362, 366 (Colo. Ct. App. 2009). Although the Wyoming law mirrors the prior Colorado statute, it remains to be seen whether Wyoming courts will interpret this exception in the same way.
Can the Law Be Circumvented by Applying Another State’s Law Under Contract?
The answer appears to be “yes,” as the Wyoming law 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 Wyoming.
What Are the Consequences If an Employer Violates the Law?
The law provides that a covenant not to compete that does not fall within one of the statutory exceptions is “void,” thereby rendering any such noncompete unenforceable. But the law does not list any specific consequences aside from the inability to enforce the noncompete.
What This Means for Employers
Companies with Wyoming-based employees or independent contractors should engage counsel to reevaluate their current and prospective restrictive covenant agreements and exit procedures.
For More Information
If you have any questions about this Alert, please contact Lawrence H. Pockers, Shannon Hampton Sutherland, Keith M. St. Aubin, Seth Dawicki, 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.