Executive Summary
- What’s new: Virginia Gov. Abigail Spanberger signed Senate Bill 170 into law, expanding Virginia’s existing restrictions on noncompetition agreements.
- Why it matters: Employers in violation of the new law may be subject to civil actions brought by former employees and civil penalties.
- What to do next: Employers should review and revise noncompetition and nonsolicitation agreement templates applicable to employees located in Virginia to comply with the law.
__________
On April 13, 2026, Virginia Gov. Abigail Spanberger (D) signed into law Senate Bill 170 (the Act), which amends Virginia’s existing restrictions on employee noncompetition agreements. Effective July 1, 2026, the Act makes noncompetition agreements unenforceable when an employer terminates an employee without cause and the employee does not receive severance pay or other prior disclosed monetary compensation.
The Act applies only to agreements entered into, amended or renewed on or after July 1, 2026, and is not retroactive. The previous iteration of the statute only prohibited noncompetition agreements with “low-wage employees,” which it defines as (i) employees with average weekly earnings below the commonwealth’s set average weekly wage, (ii) employees entitled to overtime compensation for hours worked in excess of 40 hours in one workweek, (iii) interns, students, apprentices, or trainees, paid or unpaid, working for educational experience and (iv) independent contractors compensated for their services at an hourly rate that is less than the median hourly wage for the commonwealth for all occupations.
Notably, employees whose earnings are derived, in whole or in predominant part, from sales commissions, incentives, or bonuses paid to the employee by the employer are excluded from the definition of “low-wage employee.” The Act expands this prohibition against noncompetition agreements with “low-wage employees” to also prohibit such agreements with employees discharged from employment without cause and without receipt of severance benefits or other prior disclosed monetary compensation.
Key Provisions
Severance requirement: The Act’s new restriction provides that a noncompetition agreement between an employer and an employee is unenforceable if the employer discharges the employee without providing severance benefits or other monetary payment, unless the employer discharges the employee for cause. The required severance benefits or other monetary payment must be disclosed upon execution of the noncompete agreement. The Act does not define “cause” or “severance benefits” and does not set a minimum severance amount, which may pose challenges for employers.
Nondisclosure agreements: The Act specifically provides that it does not apply to or limit the use of nondisclosure agreements protecting, among other things, trade secrets and proprietary or confidential information.
Nonsolicitation agreements: While not directly addressing nonsolicitation agreements, the Act provides that a “covenant not to compete” does not restrict an employee from providing services to a customer or client if the employee does not initiate contact with or solicit the customer or client. In January 2026, a Virginia appellate court in Sentry Force Security, LLC v. Barrera held that, under the prior iteration of the Act, provisions barring the nonsolicitation of employees are unenforceable against hourly workers and those under a defined income level but can be enforceable against other employees. Given that the Act does not modify the applicability to nonsolicitation agreements, this case law still governs.
No sale-of-business carve-out: The Act does not expressly exclude noncompetition agreements entered into in connection with the sale of a business. Thus, these limitations may still apply even in the traditionally more lenient sale-of-business context.
Enforcement and remedies: Senate Bill 170 provides for the following enforcement mechanisms and remedies for violations:
- Civil action: An employee may bring a civil action within two years of the latest of: (i) the date the covenant was signed, (ii) the date the employee learned of the covenant, (iii) the date the employment relationship ended and (iv) the date the employer attempts to enforce the covenant. Courts may void unlawful covenants and order all appropriate relief, including injunctions, payment of liquidated damages, lost compensation, damages and reasonable attorney fees and costs. Additionally, employers may not discharge, threaten, or otherwise discriminate or retaliate against an employee for bringing a civil action under the Act.
- Civil penalties: An employer in violation of the provisions prohibiting noncompetition agreements with low-wage employees and employees terminated without cause and without receiving severance pay or other prior disclosed monetary compensation shall be subject to a civil penalty of $10,000 per violation.
- Other fees: If a court finds a violation of the Act, the plaintiff is entitled to recover reasonable costs, including expert witness fees and attorney fees.
Posting requirement: The Act requires employers to post a copy of the Act or an approved summary of the Act where other legally required employee notices are posted. Failure to comply with this requirement may result in a written warning for the first violation, a civil penalty not to exceed $250 for a second violation and a civil penalty not to exceed $1,000 for a third and each subsequent violation.
Next Steps
Prior to July 1, 2026, employers with employees in Virginia should consider the following:
- Review and revise template noncompetition and nonsolicitation agreements: Assess current noncompetition and nonsolicitation template agreements applicable to employees located in Virginia to ensure compliance with the new restrictions.
- Comply with posting requirements: Obtain and post the required notice in the same location where other legally required employee notices are displayed.
- Evaluate termination practices: Review policies and procedures for employee terminations to ensure that appropriate severance or monetary payment mechanisms are in place for without-cause employment terminations.
This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.