Effective July 1, 2025, Virginia's noncompete law, Va. Code Ann. § 40.1-28.7:8, has been revised to expand the definition of "low-wage" employees to include all employees classified as non-exempt under the Fair Labor Standards Act (FLSA). The new definition will not apply retroactively to existing agreements. Rather, it will apply to agreements entered into from July 1, 2025, onward. Under the existing law, employers are prohibited from entering into, enforcing, or threatening to enforce a restrictive covenant or noncompete against a "low-wage employee."
Existing Law Until July 1, 2025
As enacted in 2020, Va. Code Ann. § 40.1-28.7:8 broadly defined a "low-wage employee" as an employee whose average weekly earnings were less than $1,137 (or $59,124 a year), the average weekly wage of employees in the Commonwealth of Virginia. The Virginia Department of Labor and Industry announced on Dec. 10, 2024, that the 2025 average weekly wage for determination of a "low-wage employee" is $1,463.10 (or $76,081.14 per year).
New Law as of July 1, 2025
As of July 1, 2025, the definition of a "low-wage employee" now includes all employees entitled to receive overtime pay under the FLSA, i.e., non-exempt employees. Executives, administrative employees, or professional employees properly subject to an exemption do not fall into the "non-exempt" category. Thus, as of July 1, employers are no longer permitted to enter into noncompete agreements with any non-exempt employees.
Employer Considerations
Virginia employers should audit their employees with an eye toward correctly classifying them under the FLSA. To the extent restrictive covenants are essential to protect legitimate employer interests and the employees are eligible for an FLSA exemption, employers may consider moving said employees to exempt status. Employers should also review any existing employment agreements and consider any necessary revisions. Finally, employers should address the use (or non-use) of noncompete agreements in any post-July 1, 2025, offer letters and employee handbooks to enhance compliance with the new Virginia requirements.
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