Effective July 1, 2025, the current Virginia statutory restriction on non-competition agreements for “low-wage employees” will expand to cover all non-exempt employees under the Fair Labor Standards Act (FLSA). This amendment, enacted through SB 1218 and signed into law on March 24, 2025, prohibits employers from entering into, enforcing, or threatening to enforce non-compete agreements with any employee classified as non-exempt under the FLSA, regardless of their earnings level.

Previously, Virginia’s non-compete ban, codified at Va. Code § 40.1-28.7:8 and effective since 2020, applied only to employees earning less than the Commonwealth’s average weekly wage (currently $1,463.10 per week or $76,081.14 annually). The new amendment broadens the definition of “low-wage employee” to include all employees entitled to overtime pay, thereby covering a larger segment of the workforce.

The amendment does not apply retroactively and will not affect non-competition agreements entered into or renewed before July 1, 2025. Employers should be aware, however, that misclassification of employees as exempt could result in unintended violations of the statute.

Enforcement provisions remain robust. Employees subject to unlawful non-compete agreements may bring a private right of action within two years of the agreement’s execution, discovery, termination, or attempted enforcement. Courts may void such agreements, issue injunctions, and award lost compensation, liquidated damages, reasonable attorneys’ fees, and civil penalties of $10,000 per violation. The Virginia Department of Labor and Industry is also authorized to impose civil penalties for violations, including up to $1,000 for failure to post required notices.

Employers must continue to display a copy of the statute in the workplace where other required workplace notices are posted. Failure to comply with the posting requirements may result in additional penalties.

In light of these changes, Virginia employers should promptly review and update their non-compete agreements and confirm that required workplace postings are in place to ensure compliance by July 1, 2025. Employers should also audit the FLSA classification of their employees and review all employment policies, offer letters, and handbooks referencing non-compete provisions.

If you have any questions about these developments, need assistance evaluating employee classifications, or have other questions related to wage and hour compliance, please contact Betty Graumlich at bgraumlich@reedsmith.com, Noah Oberlander at noberlander@reedsmith.com, Liz Husebo at ehusebo@reedsmith.com, or the Reed Smith lawyer with whom you normally work.