In 2020, Virginia enacted Virginia Code § 40.1-28.7:8 which makes non-compete agreements unenforceable for "low-wage earners" in Virginia and prohibits employers from entering into, enforcing, or threatening to enforce a covenant not to compete with any "low-wage employee." The law defines "low-wage employee" as one whose average weekly earnings are less than the average weekly wage of the Commonwealth, as determined annually in January by the Virginia Department of Labor and Industry.

On January 16, 2024, the Virginia Department of Labor and Industry announced that the average weekly wage was determined to be $1,410. This establishes the 2024 annual salary threshold at $73,320, under which non-compete agreements are not enforceable in Virginia. It is important to note that this regulation does not apply to employees who primarily earn through commissions and bonuses.

The increase in the salary threshold for non-compete agreements marks an increase from the previous limit of $69,836. Since the law's introduction in 2020, there has been an upward adjustment of nearly $14,820. Importantly, the law targets agreements made post-July 1, 2020, but also extends to current agreements, potentially rendering some non-competes unenforceable against employees who now fall under the updated wage threshold.

Employers must tread carefully, as violations of this law can lead to serious financial penalties. Affected employees have the right to pursue legal action, which can include seeking damages, lost wages and legal fees. Employers could face civil penalties as high as $10,000 per violation. This law aligns Virginia with other states that have similar restrictions, emphasizing a growing national movement to limit the use of non-compete clauses, particularly for low-wage workers.

The national landscape is also shifting. The Federal Trade Commission's proposal in early 2023 to ban most non-compete agreements, along with the National Labor Relations Board's stance against them, signifies a strong federal interest in curbing these restrictive practices. Given these developments, employers are advised to conduct thorough audits of their post-employment agreements to ensure compliance with both state and potential federal regulations.

If you have any questions about this Alert or the use of non-compete agreements, we encourage you to reach out to your Shulman Rogers contact for solutions and recommendations for addressing these issues.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.