Non-Compete Agreements in Virginia: 2020 Reforms and Standards

Virginia's 2020 Non-Compete Reforms

Virginia enacted significant non-compete restrictions through the Virginia Restrictive Employment Agreement Act (Va. Code Section 40.1-28.7:8), effective July 1, 2020. The law prohibits non-competes for lower-wage workers while maintaining enforcement for higher-paid employees under a strict reasonableness standard.

The Low-Wage Worker Ban

Non-competes are prohibited for "low-wage employees," defined as those earning less than the average weekly wage of the Commonwealth as determined by the Virginia Employment Commission (approximately $1,343/week or about $69,836 annually as of recent figures). Employers who violate this ban face:

• Civil penalties of $10,000 per violation
• The employee may recover damages, attorney fees, and costs

Strict Scrutiny for Other Workers

For employees above the income threshold, Virginia courts apply strict scrutiny to non-competes. The Virginia Supreme Court has established that these agreements are disfavored and the employer must prove:

• The restriction is no greater than necessary to protect a legitimate business interest
• The restriction is not unduly harsh or oppressive to the employee
• The restriction is not against public policy

The Home Paramount Pest Control v. Shaffer line of cases and Assurance Data v. Malyevac illustrate Virginia's strict approach.

The Functional Test

Virginia courts look at the function of the restrictive covenant, not just its label. A non-solicitation clause that effectively prevents competitive employment may be treated as a non-compete and subjected to the same strict scrutiny.

Duration and Geography

• Duration: Virginia courts have upheld restrictions of one to two years. The restriction must be proportionate to the employer's legitimate interest.
• Geography: Must be no broader than the employee's area of activity or the employer's competitive market. Virginia's diverse economy, spanning Northern Virginia's tech corridor, Hampton Roads, and more rural areas, means geographic reasonableness varies significantly.

Narrow Construction

Virginia courts narrowly construe non-competes and resolve ambiguities against the employer. An ambiguous restriction will typically be read in the employee's favor.

Red Flags

• Applied to employees earning below the average weekly wage threshold
• Duration exceeding two years
• Geographic scope broader than the employee's territory
• Vague or ambiguous activity restrictions
• "Non-solicitation" clauses that function as non-competes

When to Consult a Lawyer

Consider consulting a Virginia employment attorney if you earn below the statutory threshold and have been asked to sign a non-compete, if your employer is threatening enforcement, or if you are evaluating a complex restrictive covenant package.

This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.