New Virginia noncompete restrictions become law

On April 13, 2026, Virginia Gov. Abigail Spanberger signed Senate Bill 170 into law, further restricting the enforceability of noncompete agreements in Virginia. Effective July 1, 2026, SB 170 amends Virginia’s non-compete statute, Va. Code § 40.1-28.7:8. This amendment makes noncompetes unenforceable against an employee discharged without cause, unless the employer provides the employee with severance benefits that were disclosed when the covenant was executed.

Virginia began limiting noncompetition agreements in 2020, when the General Assembly enacted § 40.1-28.7:8 to prohibit employers from entering into noncompete agreements with “low-wage” employees — defined in 2026 as those earning less than $1,507.01 per week (just over $78,000 a year). In 2025, the General Assembly expanded the definition of a “low-wage” employee to include nonexempt employees — i.e., employees who are eligible for overtime compensation under federal law.

Senate Bill 170 imposes additional restrictions on noncompetes. Under SB 170, if an employee with a noncompete is “discharged” without “cause,” then the noncompete is unenforceable unless the employer provides “severance benefits or other monetary payment,” which must be “disclosed upon execution” of the agreement. In practice, this means an employer can only enforce a noncompete against an employee “discharged” without “cause” if that employee is paid a predetermined monetary payment disclosed to the employee at the time of the agreement’s execution. The law does not alter the enforcement of noncompetes against employees fired for “cause.” The law affects only noncompetes entered into or amended on or after July 1, 2026.

The statute leaves several important questions unanswered. The law does not define “discharge,” “cause,” “severance benefits,” or “other monetary payment.” Nor does it require that the employee be compensated for the full duration of the restricted period. In other words, if the noncompete prevents the employee from working in a specific profession for two years, the law does not require that the company fully compensate the employee for that entire two-year period. Rather, the statute requires only that the employer provide severance benefits or other monetary payment, disclosed at the time the covenant is executed, as a condition of enforcing the noncompete.

As a result of the new law, Virginia employers should update their restrictive covenant forms. At a minimum, employers must determine whether they want to preserve the ability to enforce noncompete provisions against employees discharged without “cause.” If so, they should decide what severance benefits or other monetary payment will be offered, how that payment will be disclosed at execution, and whether existing severance programs need to be revised to avoid overlap or inconsistency. Employers should also consider whether to define “cause” in the agreement and, if so, how broadly to do so.

Given the statute’s ambiguity, it is nearly certain that there will be litigation surrounding, among other things, whether an employee has been terminated for “cause,” whether the severance payment requirement is sufficient, and whether certain terminations qualify as a “discharge.”

As under the existing statute, attempting to enforce an unlawful noncompete can result in an award for “all appropriate relief,” including lost compensation, liquidated damages and attorney fees.

Employers should also be mindful of the Virginia Court of Appeals’ recent unpublished decision in Sentry Force Security LLC v. Barrera. In Sentry Force, the Court, analyzing the preamendment version of the statute, concluded that employee non-solicitation provisions qualify as “covenants not to compete” under § 40.1-28.7:8, while client nonsolicitation provisions generally do not. The case is now on appeal to the Supreme Court of Virginia. Nonetheless, companies should assess how this decision may affect their existing nonsolicitation provisions and agreements.

Other new restrictions

SB 170 is not the only restrictive covenant bill in Virginia. This legislative session, two other noncompete restrictions have passed.

The first, House Bill 627, similarly amends § 40.1-28.7:8, banning employers from entering into noncompete agreements with “health care professionals,” defined as “any person licensed, registered, or certified by the Board of Medicine, Nursing, Counseling, Optometry, Psychology, or Social Work.”

The bill provides several carve-outs. First, it allows healthcare professionals to execute restrictive covenants in conjunction with the sale of a business. Second, it permits employers to seek repayment of “recruitment-related costs, including relocation expenses, signing or retention bonuses … as well as recruiting, education, or training expenses” when the departing individual has been employed for fewer than five years. Third, it permits employers to use “narrowly construed” client nonsolicitation agreements with healthcare professionals. However, this legislation does not prevent departing healthcare professionals from disclosing to patients that they are continuing their practice elsewhere, informing their patients of the right to choose their healthcare professional, or providing patients with the contact information for their new practice.

The second, Senate Bill 240, amends two different statutes, § 13.1-559 and § 13.1-563. Although this amendment also prohibits noncompete agreements, these restrictions apply to retail franchising. Under SB 240, franchisors are prohibited from entering into blanket noncompete agreements with franchisees. However, the amendment provides one exception — if the franchisee sells the franchise “at a mutually agreed upon price,” the sale may include a noncompete clause for no more than two years.

Nationwide trends

Virginia courts have been skeptical of noncompete agreements long before § 40.1-28.7:8 was enacted. For decades, Virginia courts have routinely declined to “bluepencil” overbroad agreements. In recent years, that skepticism has intensified, both in Virginia and nationally, and the enactment of § 40.1-28.7:8 and amendments like SB 170 reflect that broader concern.

SB 170 mirrors a broader national trend. Since at least 2018, there has been a bipartisan push to restrict the use of non-
compete agreements.

Under the Biden administration, the Federal Trade Commission proposed a rule banning noncompete agreements in most contexts. While that proposed rule was struck down in 2024, the Trump administration’s FTC Chairman, Andrew N. Ferguson, reaffirmed the FTC’s focus on enforcement against “unjustified, overbroad, unfair, or anti-competitive noncompete agreements.” And although legislative efforts have failed, a bipartisan group of lawmakers has repeatedly introduced a bill to ban noncompete agreements since 2019.

Several factors likely contribute to the growing reluctance to permit noncompetes. A study by the Government Accountability Office shows that nearly 20% of Americans are now subject to noncompete agreements, including an increasing number of parttime, hourly and low-wage employees. The COVID-19 pandemic also coincided with historic unemployment levels and heightened attention to labor mobility, worker protections, and employee activism.

Whatever the policy rationale, the General Assembly has sought to limit noncompetes three times in the last six years. Given this increased scrutiny, employers should carefully draft their noncompete agreements, ensuring that the agreements are narrowly tailored to protect their legitimate business interests without being unduly burdensome.

• Sentry Force Security LLC v. Barrera

Ryan Bates is a partner with Hunton Andrews Kurth in Washington, D.C. He can be reached at [email protected]. Mary Stoney is an associate with the firm and is also based in D.C. She can be reached at [email protected].