On March 4, 2026, the Virginia General Assembly approved Senate Bill No. 170, which amends the existing non-compete statute to limit the enforceability of restrictive covenants for certain terminated employees. If enacted, the bill would invalidate non-competes for employees who are laid off without severance benefits or other monetary payment, unless they are terminated for cause. The severance benefits or monetary payment would need to be disclosed to the employee upon execution of the restrictive covenant. Notably, this amendment does not clarify whether the definition of a “covenant not to compete” encompasses customer non-solicit restrictions, which have the effect of “restrict[ing] an individual's ability, following the termination of the individual's employment, to compete with his former employer.”
Additionally, the bill would amend Virginia’s existing non-compete statute by broadening the scope of relief available beyond low-wage employees. Specifically, any employee would be entitled to bring a civil action against an employer that attempts to enforce a non-compete in violation of the law. If the court finds a violation of the statute, employees could be entitled to injunctive relief, liquidated damages, lost compensation, other damages, as well as reasonable attorneys’ fees and costs. These restrictions would apply to non-competes signed on or after July 1, 2026.
The Virginia legislation is similar to those enacted in other states. For example:
- In Massachusetts, a non-compete agreement is not enforceable against employees that have been terminated without cause or laid off (unless included in a separation agreement that provides the employee with seven business days to revoke the employee’s signature).
- In Nevada, a non-compete agreement issued to a laid off or terminated employee is void, unless the employer continues to pay the employee’s salary, benefits, or equivalent compensation.
- In Washington, a non-compete issued to a laid off employee is void, unless the employer pays compensation equivalent to the employee’s base salary for the duration of the non-compete period.
The bill now heads to Governor Spanberger’s desk for signature. If, as expected, Governor Spanberger signs this bill into law, Virginia employers should promptly review and update their non-compete agreements to ensure compliance and consider consulting employment counsel so they are prepared to navigate these potential changes. If signed, the law would apply to any contract, covenant, or agreement entered into, amended, or renewed on or after July 1, 2026.
