Virginia has always viewed restrictive covenants, including non-compete agreements, skeptically as unfair restraints on trade. However, employers have widely relied on well-drafted restrictions on competition as a means of protecting against employee misuse of client relationships and opportunities to start a competing business, for example.
Now, however, with Governor Ralph Northam’s signature on House Bill 330 and Senate Bill 480, Virginia employers will not be able to enter, enforce, or threaten to enforce a covenant not to compete with a “low-wage employee.” The new restrictions are applicable to covenants not to compete entered on or after July 1, 2020.
The new law defines a “low-wage employee” as either (i) an employee, intern, student, apprentice, or trainee whose average weekly earnings are less than the average weekly wage in the Commonwealth, or who is employed without pay, or (ii) an independent contractor who is compensated for services at an hourly rate that is less than the median hourly wage for the Commonwealth. According to the Virginia Employment Commission’s most recent report, the average weekly wage for Virginia workers was $1,125, or $58,500 annually. The VEC updates average weekly wage statistics quarterly, meaning that Virginia employers will need keep tabs on weekly wage upticks, which could potentially invalidate existing non-compete agreements.
A “covenant not to compete” is broadly defined in the new law as “an agreement that restrains, prohibits, or otherwise restricts an individual’s ability to compete with his former employer.”
Low-wage employee subject to a covenant not to compete are permitted under the new law to bring a civil action against an employer for appropriate relief, which includes enjoining the conduct of the employer, the recovery of liquidated damages, lost compensation, and reasonable attorney fees and costs, including expert witness fees. The law also provides that if the court finds a violation of the bill’s provisions, the plaintiff is entitled to recover reasonable costs, including reasonable fees for expert witnesses, and attorneys’ fees.
Employers are required to post in the workplace a notice of the prohibition or a summary of the notice approved by the Department of Labor and Industry and provides that an employer is subject to a warning for a first offense and to a civil penalty for a subsequent offense for failure to post such notice or approved summary.
Additional Questions About the New Laws
We will be providing additional updates regarding the new Virginia employment laws. If you have questions about, or need assistance with, the new laws, please contact Doug Taylor at (703) 525-4000 or firstname.lastname@example.org.
This article is for informational purposes only and does not contain or convey legal advice. Consult a lawyer. Any views or opinions expressed herein are those of the authors, and are not necessarily the views of any client.