Last week, Virginia Gov. Abigail Spanberger signed into law SB 170, which applies to employees who were terminated and not offered severance unless they were terminated for cause. The new law expands the Commonwealth's prior prohibition on covenants not to compete for "low wage employees" to a broader group of employees. The new law goes into effect July 1, 2026. It applies only prospectively and does not invalidate agreements entered into, amended or renewed prior to July 1, 2026.
Previous statutory provisions invalidated non-compete provisions for "low wage employees" – i.e., those earning less than the average weekly wage in Virginia, currently $1,507.01 or $78,364.52 per year, as well as employees categorized as nonexempt under the Fair Labor Standards Act (FLSA). The new law expands on these provisions and prohibits the enforcement of covenants not to compete where "such employer discharges such employee from employment without providing severance benefits or other monetary payment to such employee, unless such employer discharges such employee for cause." The new law further provides that "[s]uch severance benefits or other monetary payment shall be disclosed upon execution of the covenant not to compete."
So, for employees who are let go or discharged without "cause" – an undefined term in the statute – their covenant not to compete will not be enforced unless the employer provided for some "severance benefits or...
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