RESOURCES

Virginia Non-Compete Agreements: What Changed on July 1, 2026

August 14, 2026

Virginia used to have a simple non-compete rule. You could not use one with a low-wage employee, and everything else was governed by common law reasonableness. That era is over.

As of July 1, 2026, Virginia Code § 40.1-28.7:8 imposes a requirement that reaches every employee in the Commonwealth, regardless of pay, title, or seniority. If you discharge someone without cause and you did not promise them severance or another monetary payment, disclosed when the agreement was signed, you cannot enforce their non-compete.

That is not a low-wage rule. That is an executive rule, a sales rule, and a partner-track rule.

Who is covered

Three layers now stack on top of each other. All three are live.

Low-wage employees, since 2020. For 2026, the Virginia Department of Labor and Industry puts the average weekly wage threshold at $1,507.01 per week, about $78,364 a year. That figure resets annually, so check it before you paper anything.

The definition also captures anyone entitled to overtime under the Fair Labor Standards Act, whatever they earn, a prong added in 2025. It captures interns, students, apprentices, and trainees, paid or unpaid. And it captures independent contractors paid at an hourly rate below Virginia’s median hourly wage for all occupations, as reported by the Bureau of Labor Statistics.

It excludes employees whose earnings derive in whole or predominant part from sales commissions, incentives, or bonuses.

Every employee, since July 1, 2026. The new severance requirement has no wage floor and no seniority ceiling.

Health care professionals, since July 1, 2026. A flat ban, discussed below.

Existing agreements

The severance requirement applies to covenants entered into, amended, or renewed on or after July 1, 2026. Agreements executed before that date are governed by prior law.

Note the word amended. Touching an old agreement can pull it into the new regime. So can a renewal you process without thinking about it.

This date line is the single most consequential fact in the statute, and it is the one employers are going to get wrong.

New agreements: the severance requirement

The new subsection C reads:

No covenant not to compete between an employer and an employee is enforceable if 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. Such severance benefits or other monetary payment shall be disclosed upon execution of the covenant not to compete.

Four features drive the practical impact.

It applies to everyone. Not just low-wage workers. Not just non-exempt workers. There is no carve-out for executives, high earners, or commissioned sales staff. The people whose non-competes employers most want to enforce are squarely inside it.

“Cause” is undefined. The statute does not say what cause means, and no Virginia case interprets this provision yet. If you want a workable standard, define it in the agreement, in a way a judge will accept as something more than pretext.

The payment is undefined too. No minimum amount. No required duration. No guidance on whether continued employer-paid health coverage counts, or whether other monetary payment requires actual cash. It is also unclear whether the agreement must state the amount or merely the fact of a payment.

Disclosure happens at execution, not at termination. This is the awkward part. The severance must be disclosed when the covenant is signed, potentially years before anyone knows the circumstances of the separation. Compensation received during employment, such as raises, bonuses, or equity grants, almost certainly will not satisfy a requirement framed around discharge.

Executives and high earners

If you are an executive who signed a non-compete and were let go, three questions decide most of the analysis.

When did you sign? Agreements entered into, amended, or renewed on or after July 1, 2026 are subject to the severance requirement. Earlier ones are not.

Were you discharged, and was it for cause? A voluntary resignation does not trigger the severance rule. A discharge without cause does.

Were you paid anything on the way out, and was that payment disclosed in the agreement itself? If not, the covenant may be unenforceable against you.

Separately, if you are non-exempt under the Fair Labor Standards Act, which is a function of duties rather than title or salary alone, the covenant may be unlawful regardless of what happened at separation.

Do not simply ignore a demand letter. But do not assume the covenant is valid either. A threat to enforce an unlawful covenant is itself actionable.

Health care professionals

Virginia now flatly prohibits entering into, enforcing, or threatening to enforce a non-compete with a health care professional, defined as any person licensed, registered, or certified by the Board of Medicine, Nursing, Counseling, Optometry, Psychology, or Social Work.

The statute preserves three tools.

Sale-of-business covenants. Permitted as part of a sale that includes all or substantially all of the operating assets and goodwill of the professional’s business entity, or a division, subsidiary, or ownership interest, provided the covenant is reasonable in scope, duration, and geographic area.

Recruitment cost repayment. Employers may require repayment, in full or prorated, of relocation expenses, signing or retention bonuses, and recruiting, education, or training expenses from a professional employed fewer than five years.

Narrow customer non-solicits. Employers may restrict soliciting customers with whom the professional had material contact, for the same or substantially similar products and services. The restriction must be narrowly construed. And it may not prevent the professional from telling a patient they were treating that the professional is continuing to practice, providing new contact information, or informing the patient of the right to choose a provider.

Those explicit carve-outs are telling. The legislature would not have needed to permit training repayment and customer non-solicits if they sat safely outside the definition of a covenant not to compete.

**Non-solicits: what Sentry Force decided**

The statute defines a covenant not to compete broadly: any covenant or agreement, including a provision of an employment contract, that restrains, prohibits, or otherwise restricts an individual’s ability, following the termination of the individual’s employment, to compete with his former employer. It then carves out one thing. A covenant may not restrict an employee from providing a service to a customer if the employee did not initiate contact with or solicit that customer.

In Sentry Force Security, LLC v. Barrera, Record No. 1405-24-4, 2026 WL 200848 (Va. Ct. App. Jan. 27, 2026), an unpublished decision on appeal from the Alexandria Circuit Court, a security company sued a former account manager who had formed a competing business and allegedly solicited both its customers and its employees. He argued the covenants were unenforceable because he was a low-wage employee.

The Court of Appeals drew a three-way line.

Customer non-solicits barring outbound solicitation are enforceable. Because the statutory definition expressly excludes restrictions where the employee does not initiate contact, a clause barring the former employee from initiating contact falls outside the definition and may be enforced even against a low-wage worker.

Clauses barring acceptance of unsolicited business are not. An employer may not stop a low-wage worker from serving a customer who reaches out on their own.

Employee non-solicits, meaning no-recruit clauses, are covenants not to compete. The court held the statute barred Sentry Force from enforcing the provision preventing Barrera from soliciting its other employees.

Three caveats. The decision is unpublished and not binding precedent. It analyzed the pre-amendment statute. And both parties petitioned the Supreme Court of Virginia, which had not announced whether it would take the appeal as of this writing.

Even so, it is the only appellate decision on point, and the 2026 amendments left the definition of a covenant not to compete untouched, so the distinction should carry forward.

Franchises

Effective the same day, House Bill 69 and Senate Bill 240 amended the Virginia Retail Franchising Act, § 13.1-557 et seq., in two ways.

Post-term non-competes are banned. It is now unlawful, in connection with the sale or offer to sell a franchise in Virginia, to offer or enter into a franchise agreement that restricts the franchisee’s right to engage in the business of offering, selling, or distributing goods or services at retail after the agreement terminates or expires. The ban covers both termination and expiration.

The exception is narrow. Where a franchisee sells the franchise at a mutually agreed price, to a third party or back to the franchisor, the parties may agree to a non-compete lasting no more than two years from the sale.

Virginia law must govern. Any franchise agreement offered or entered into under the Act must be governed by the law of the Commonwealth. Franchisors can no longer designate a home-state law across the system for Virginia franchises. For many national systems this is the bigger operational change of the two.

The amendments are prospective only. The Act reaches franchises that contemplate or require the franchisee to maintain a place of business in Virginia, broad enough to capture service concepts and not just brick-and-mortar retail. The State Corporation Commission’s Division of Securities and Retail Franchising has issued guidance on updating franchise disclosure documents and Virginia addenda.

This is a separate statute from § 40.1-28.7:8. A franchisee is not an employee, and the two regimes have different rules, exceptions, and remedies.

The penalties are not theoretical

Violating the ban carries a civil penalty of $10,000 for each violation, payable to the Commissioner. An employee or health care professional may sue in circuit court within two years of the latest of four dates: when the covenant was signed, when the employee learned of it, when the employment relationship ended, or when the employer took any step to enforce it.

The court may void the covenant, enjoin the employer’s conduct, order liquidated damages, and award lost compensation, damages, and reasonable attorney fees and costs. Retaliating against someone for bringing such an action is separately prohibited.

There is also a posting requirement. Employers must post the statute or a Department-approved summary where other required employee notices appear. Failure draws a written warning for a first violation, up to $250 for a second, and up to $1,000 for a third and each subsequent violation.

The fee-shifting provision is what makes this economically live. A modest claim becomes worth bringing when fees are recoverable.

Common mistakes we are already seeing

Assuming the low-wage rule only touches hourly staff. The overtime prong captures well-paid people whose duties do not meet an exemption. Misclassification and non-compete exposure are now the same problem.

Amending an old agreement without thinking. A pre-July-2026 covenant is safe from the severance requirement until you amend or renew it. Routine housekeeping can destroy that protection.

Running a national template. A single form used across states will fail here on the severance disclosure, the health care ban, or both.

Leaving “cause” undefined. The statute will not define it for you, and the employer bears the practical burden of showing the discharge was for cause.

Keeping health care professionals in the standard template. Six licensing boards are covered. Practices, home health agencies, and behavioral health providers all need a rebuilt form.

Assuming a non-solicit is safe because of the label. After Sentry Force, what matters is what the clause restricts, not what it is called.

Never posting the statutory notice. It is cheap to fix and carries escalating penalties.

How this becomes a lawsuit

Two sales managers at the same manufacturer, identical agreements, identical duties. One signed in May 2026. The other signed in August 2026, after a promotion.

In 2027 the company restructures and discharges both without cause. Neither receives severance. Both join a competitor. The company files for injunctive relief against each.

The August hire. Her covenant was entered into after July 1, 2026, so subsection C applies. She was discharged without cause. She received no severance benefits or other monetary payment, and the agreement disclosed none at execution. The covenant is unenforceable, and the analysis stops there. The court never reaches whether the geographic scope was reasonable or whether the company had a protectable interest.

The May hire. His covenant predates the amendment, so prior law governs. Now the company gets the fight it expected. Is the restriction reasonable in duration, geography, and scope of activity? That is a real case, and it may well win.

Same company. Same form. Same facts on the ground. Opposite outcomes, decided by a date on a signature page.

Notice what that means in practice. The exposure is not created at termination. It is created at signing, by whoever processed the paperwork. And it runs the other way too. An employer that wanted enforceable covenants going forward could have had them, for a disclosed and modest payment, if anyone had priced the question before the August agreement went out.

What you should do now

If you are a Virginia employer:

✓ Inventory every restrictive covenant: non-competes, non-solicits, no-recruit clauses, no-service provisions, forfeiture-for-competition terms

✓ Flag every agreement signed, amended, or renewed on or after July 1, 2026

✓ Stop amending or renewing older agreements without a deliberate decision

✓ Decide, position by position, whether a non-compete is worth it; a confidentiality agreement plus a narrow customer non-solicit often does more work with less risk

✓ Strip language barring acceptance of unsolicited business, and treat no-recruit clauses as vulnerable

✓ If you want enforceability after a without-cause discharge, build the payment in and disclose it at execution

✓ Define “cause” in the document

✓ Screen overtime status and the wage threshold before papering anyone

✓ Pull health care professionals out of your non-compete template entirely

✓ Post the statutory notice with your other required employee notices

✓ Replace any national template with a Virginia-compliant form for Virginia workers

Bottom line

Virginia has not banned non-competes. It has made them conditional and expensive. The employers who still have enforceable covenants in 2027 will be the ones treating them as a paid-for benefit, drafted narrowly, priced deliberately, and reserved for the few roles that justify one.

The employers who copy last year’s form into this year’s offer letter will find out the hard way, with fee-shifting attached.

McClanahan Powers drafts and litigates restrictive covenants for Virginia businesses and represents executives and professionals facing enforcement, in Virginia state courts and the Eastern District of Virginia. If you are holding an agreement and are not sure where it stands, send us the document and the signature date.

Contact McClanahan Powers today.

Frequently asked questions

Are non-competes enforceable in Virginia?

Sometimes. Virginia has not banned them outright, but they are unenforceable against low-wage employees, employees entitled to overtime under the Fair Labor Standards Act, and health care professionals. For agreements signed on or after July 1, 2026, they are also unenforceable against any employee discharged without cause who was not provided disclosed severance or other monetary payment. Even a covenant clearing those hurdles must still be reasonable in scope, duration, and geography under Virginia common law.

Does the new severance rule apply to my existing non-compete?

Not unless you amend or renew it. The rule applies to covenants entered into, amended, or renewed on or after July 1, 2026.

How much severance do I have to pay to keep a non-compete enforceable?

The statute does not say. There is no minimum amount, no required duration, and no definition of other monetary payment. Because it must be disclosed when the covenant is executed, specify terms in the agreement rather than leaving it open.

What if the employee quits, or is fired for cause?

The severance requirement is triggered only by a discharge without cause. Resignations and for-cause terminations do not trigger it, though the low-wage, overtime, and health care professional prohibitions still apply independently.

Who decides whether a discharge was “for cause”?

Ultimately a court, on the facts. The statute supplies no definition, which is why defining it in the agreement, and documenting the basis for the discharge at the time, matters more here than it did before.

Are non-solicitation agreements covered?

It depends on the type. In Sentry Force Security, LLC v. Barrera, unpublished and not binding, the court held customer non-solicits are enforceable against low-wage workers to the extent they bar the former employee from initiating contact, but not to the extent they bar accepting unsolicited business, and that employee no-recruit clauses are covenants not to compete and cannot be enforced against low-wage workers. Both parties petitioned the Supreme Court of Virginia, so the analysis may change.

Does the law affect confidentiality or trade secret agreements?

No. The statute expressly does not limit an employer’s ability to protect trade secrets or proprietary information by other lawful means. For many roles that protection does most of the practical work a non-compete was doing.

I’m a nurse practitioner with a non-compete. Is it enforceable?

If you are licensed, registered, or certified by the Board of Medicine, Nursing, Counseling, Optometry, Psychology, or Social Work, an employer may not enter into, enforce, or threaten to enforce a non-compete against you. Narrow customer non-solicits, sale-of-business covenants, and certain training repayment obligations remain possible.

Can my employer make me repay training costs if I leave?

For health care professionals employed fewer than five years, the statute permits repayment of relocation expenses, signing or retention bonuses, and recruiting, education, or training expenses. Outside that context, repayment provisions are analyzed under general contract principles and may themselves function as restraints.

What can I recover if my employer tries to enforce an unlawful non-compete?

The court may void the covenant, enter an injunction, order liquidated damages, and award lost compensation, damages, and reasonable attorney fees and costs. A separate $10,000 civil penalty per violation is payable to the Commissioner. Suit must be brought within two years of the latest of four trigger dates.