Virginia’s revised noncompete law adds new uncertainty

Virginia has amended its noncompete statute to prohibit employers from entering into non-competition agreements with employees who are “non-exempt” under the Fair Labor Standards Act (“FLSA”). The new law will take effect on July 1 and will apply to non-competition agreements entered on or after that date.

This amendment will not only expand Virginia’s noncompete law to cover more employees, but it will also add a new layer of legal complexity to the analysis, making it harder for employers to determine with any degree of certainty which employees can be properly subject to a noncompete agreement.

Virginia first enacted a noncompete statute in 2020. At that time, the statute prohibited employers in Virginia from entering noncompete agreements with “low-wage employee[s].”  The statute defined a “low-wage employee” as any employee whose average weekly wage fell below Virginia’s average weekly wage as determined by the Virginia Department of Workforce Development and Advancement. For 2025, the average weekly wage is $1,463.10 per week or approximately $76,081 annually.

Amendment not retroactive

Effective July 1, the amended statute expands the definition of “low-wage employee” to include those employees who earn less than the average weekly wage or any other employees who, regardless of their average weekly earnings, are entitled to overtime compensation under the FLSA.

In other words, in addition to banning noncompetes with low-wage workers, the amended statute also prohibits Virginia employers from entering noncompete agreements with any employee who is or should be classified as non-exempt under the FLSA. The amendment is not retroactive, which means that noncompete agreements ratified before July 1 will still be valid and enforceable, assuming the agreements comply with the prior version of the statute and Virginia common law related to enforceability of noncompetes.

As amended, the statue continues to provide employees with a private cause of action to sue an employer that attempts to enforce a prohibited noncompete against the employee. In such litigation, a court would have jurisdiction to void any prohibited noncompete agreement and to order all appropriate relief, including lost compensation, damages, and liquidated damages.

If the court finds a violation of the statute, the prevailing employee is entitled to recover attorney’s fees and costs, including costs and reasonable fees for expert witnesses. The statute also authorizes the labor commissioner to levy civil penalties of up to $10,000 for each violation of the statute.

Four states ban noncompetes

In many respects, Virginia’s expanded restrictions on employment-based noncompete agreements are not entirely surprising given the national trend towards limiting the use of noncompetes in the employment context. In the last few years, numerous other states have enacted varying degrees of restrictions designed to curtail the use of noncompetes, particularly for low wage workers.

In fact, four states have completely banned employers from using noncompete agreements with employees — a move that the Federal Trade Commission also pursued last year in its currently-enjoined final rule that attempted to ban the use of noncompete agreements in nearly all situations.

That said, by limiting the use of noncompete agreements based on an employee’s non-exempt status, Virginia’s amended statute adds an entirely new legal analysis to the equation. Under the original version of the statute, employers could easily determine which employees are subject to the statute’s noncompete ban based on the employee’s weekly compensation, and employers had the relative flexibility to simply increase an employee’s weekly wage to bring the employee above the statutory threshold if the employer wanted to enter into a noncompete agreement with the employee.

Under the amended statute, however, an employer’s ability to enter a noncompete agreement with an employee will turn not only on the employee’s weekly wage, but also on the employee’s exempt status under the FLSA — a complex factual and legal determination in its own right. Many of the FLSA’s exemptions, including the most common “white collar exemptions”, require the employee to receive a fixed weekly salary (as opposed to an hourly rate of pay) and have a primary duty that satisfies the specific exemption at issue—a notoriously fact-intensive inquiry that turns on the employee’s specific job duties and responsibilities.

The individualized nature of this inquiry can lead to potential variation from one employee to the next and can sometimes make it difficult for employers to adequately predict if their classification decisions will survive a legal challenge. These uncertainties are compounded by the fact that employers cannot typically change an employee’s exempt status without fundamentally changing the employee’s job duties and responsibilities to satisfy the particular FLSA exemption relied upon.

Review FLSA classifications

Considering these realities, the amended statute places a greater burden on the employer to show that the employee is properly classified as exempt under the FLSA to justify using a noncompete agreement. This could lead to costly and protracted litigation to determine the threshold question of whether the employee is exempt or non-exempt under the FLSA before the parties and the court even get to the analysis of whether the noncompete, as drafted, is enforceable under Virginia common law.

The amended statute marks a substantial change in Virginia’s noncompete law. Given these changes, employers should review their noncompete practices and be prepared to bring them into compliance with these new requirements, including discontinuing the use of noncompete agreements for non-exempt employees.

Employers should also take this opportunity to review and evaluate their FLSA classification decisions for their exempt employees. Otherwise, employers could quickly find themselves embroiled in a FLSA misclassification lawsuit based simply on its use of a noncompete agreement with particular employees.

Tyler S. Laughinghouse is counsel and Ryan A. Glasow is a partner with Hunton Andrews Kurth LLP in Richmond. Laughinghouse and Glasgow are members of the firm’s labor and employment practice.