Virginia: New restrictions on employee non-competes and non-solicits enacted

At a glance

• Virginia has enacted Senate Bill (SB) 170, which imposes new restrictions on the enforceability of covenants not to compete, representing a substantial expansion of the Commonwealth’s regulatory framework governing post-employment restrictive covenants.
• SB 170, which took effect on July 1, 2026, prohibits enforcement of covenants not to compete against employees who are terminated without cause unless the employer provides severance benefits or other monetary payment disclosed at the time the covenant is executed.
• The new legislation expands Virginia’s existing statutory framework, which previously restricted covenants not to compete only for low-wage and nonexempt employees, by imposing conditions on the enforceability of covenants not to compete for all employees, regardless of compensation or exempt status.
• Under the Virginia Court of Appeals’ January 2026 decision in Sentry Force Security, LLC v. Barrera, employee non-solicitation covenants and customer non-solicitation covenants that prohibit an employee from accepting unsolicited business from a company customer fall within the statutory definition of a 'covenant not to compete,' meaning these new requirements are likely to apply to such provisions as well. Conversely, customer non-solicitation covenants that prohibit an employee from directly soliciting business from a company customer fall outside the statutory definition of a 'covenant not to compete' and therefore are unlikely to be subject to the new law’s requirements.
• Employers may review restrictive covenant agreements, severance practices, and template documents to evaluate compliance with the statute’s severance and disclosure requirements.

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Virginia has enacted legislation that expands the Commonwealth’s restrictions on the use and enforceability of restrictive covenants. On April 13, 2026, Governor Abigail Spanberger signed SB 170 into law, expanding Virginia’s prior framework, which applied to low-wage employees and nonexempt employees under the Fair Labor Standards Act (FLSA).

SB 170 took effect on July 1, 2026 and applies to all agreements entered into, amended, or renewed on or after that date. The law is not retroactive and therefore agreements entered into before July 1, 2026 are not subject to the new restrictions. Below is an overview of the law’s key provisions and their practical implications for employers.

Severance requirement for enforceability of certain restrictive covenants

Under SB 170, covenants not to compete entered into, amended, or renewed on or after July 1, 2026 are void and unenforceable against an employee who is terminated by an employer without cause, unless:

• the employer provides the employee with severance benefits or other monetary payment; and
• the severance benefits or other monetary payment supporting enforcement of a covenant not to compete are disclosed to the employee at the time the covenant is executed.

SB 170 does not define 'cause,' 'severance benefits,' or 'other monetary payment.' Nor does it establish a minimum severance or payment amount or indicate whether severance can be conditioned on a release. These terms may be clarified through future guidance from the Virginia Department of Labor and Industry or through judicial interpretation. Notably, SB 170’s restrictions apply to employer-initiated terminations without cause; they do not apply when an employee voluntarily resigns or an employer terminates an employee for cause.

In addition, the Court of Appeals of Virginia in Sentry Force Security, LLC v. Barrera, held that an agreement barring an employee from actively soliciting the employer’s customers is not a 'covenant not to compete' under Va. Code § 40.1-28.7:8. Accordingly, covenants prohibiting a former employee from actively soliciting an employer’s customers are likely to remain enforceable without severance or other monetary payment.

Conversely, the court held that employee non-solicitation provisions constitute 'covenants not to compete' and are therefore likely subject to the statute’s severance requirements. The court also distinguished between different types of customer restrictions. Customer non-solicitation covenants prohibiting a former employee from actively soliciting an employer’s customers generally fall outside the statutory definition of a 'covenant not to compete,' whereas restrictions relating to the acceptance of unsolicited business may warrant separate analysis under the statute.

What agreements are still permitted?

Despite the expanded restrictions on covenants not to compete, Virginia employers retain the ability to use other forms of post-employment restrictive covenants under Virginia law, including:

• Confidentiality and nondisclosure agreements. SB 170 expressly preserves the use of confidentiality and nondisclosure agreements that restrict the taking, misappropriation, or sharing of trade secrets (as defined in Va. Code § 59.1-336) and proprietary or confidential information.
• Limited customer non-solicitation agreements. Under existing Virginia law, the statutory definition of a 'covenant not to compete' excludes covenants that merely restrict an employee from providing services to a customer or client of the employer when the customer, rather than the employee, initiated contact. Such agreements therefore may continue to be enforceable without severance or other monetary payment. 

Enforcement exposure and penalties

The legislation preserves and extends the existing enforcement framework under Va. Code § 40.1-28.7:8. A worker affected by a violation may recover the following:

• Liquidated damages, lost compensation, and reasonable attorneys’ fees and costs through a civil action against any employer that attempts to enforce a restrictive covenant in violation of the law.
• Judicial relief, including orders voiding unlawful covenants and issuing injunctions.
• Civil penalties of USD10,000 for each violation, as determined by the Commissioner of Labor and Industry.

In addition, employers must post a copy of the statute or an approved summary in the same location where other state and federal employment notices are posted. Failure to comply with the posting requirement will result in a written warning for the first violation, a civil penalty of up to USD250 for a second violation, and a civil penalty of up to USD1,000 for a third and each subsequent violation.

Practical takeaways for employers

SB 170 took effect on July 1, 2026. The legislation raises a number of considerations for employers:

• Restrictive covenant templates. Employers may review and revise template employment agreements, offer letters, severance agreements, and standalone covenant agreements that contain noncompetition or non-solicitation provisions. Agreements executed on or after July 1, 2026 are subject to the new statutory requirements, including disclosure at execution of any severance benefits or other monetary payment supporting enforceability following a termination without cause.
• Definition of cause. Because SB 170 does not define 'cause,' employers may consider whether to include a definition within their covenant agreements and whether that definition aligns with provisions contained in other agreements, such as executive employment agreements, equity plans, and severance arrangements.
• Employee classifications. Employers may review employee classifications under the FLSA to confirm exempt and nonexempt status. Covenants not to compete remain prohibited for nonexempt employees regardless of the new legislation.
• Workplace postings. Employers may review workplace-posting practices to confirm compliance with the amended statute.
• Severance strategy. Because enforceability of covered covenants following a termination without cause depends upon providing severance benefits or other monetary payment, employers may consider whether, and under what circumstances, such consideration will be offered. SB 170 does not establish a minimum severance amount, and future guidance from the Virginia Department of Labor and Industry or future case law may provide additional clarity.
• Enforceability considerations. Virginia follows the 'red pencil' doctrine, meaning courts will not modify an overbroad restrictive covenant to make it enforceable. Rather, a provision determined by a court to be overbroad will be stricken entirely from the underlying agreement. This framework could increase the importance of carefully tailoring restrictive covenants.

Because SB 170 applies prospectively, agreements entered into before July 1, 2026 that have not been amended or renewed after that date remain outside the scope of the statute’s new severance and disclosure requirements. Agreements entered into, amended, or renewed on or after July 1, 2026, are subject to SB 170’s updated restrictions and enforceability requirements.

For additional information regarding these developments, please contact the authors or your DLA Piper relationship partner.