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Virginia's Senate Bill 170 (2026 Session) introduces new limitations on the enforceability of restrictive covenants by protecting employees who are terminated without cause. More specifically, the proposed amendment will render any non-compete unenforceable against an employee who was discharged from employment unless severance benefits or other monetary payments are made to the employee. The law is silent as to what constitutes sufficient "severance benefits or other monetary payments," but those terms are required to be disclosed to the employee "upon execution of the covenant not to compete."
There are two notable exceptions. First, the amendment will not apply to employees that are terminated for cause. Second, the amendment will only apply prospectively to agreements entered into after July 1, 2026; not retroactively.
The bill also provides some teeth by amending the existing non-compete statute to allow employees to bring a civil action against any employer who attempts to enforce a non-compete in violation of the law. Any successful employee will be entitled to recover reasonable costs, fees for expert witness, and attorneys' fees. Further, employers who violate the statute face civil penalties of $10,000 per violation, paid into the Commonwealth's general fund.
If Governor Spanberger signs the bill into law, employers will need to move quickly to update their existing templates to include clear severance or other monetary benefits to be provided "upon execution" of any non-compete agreement.
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