Since July 1, 2020, Virginia has prohibited post-employment noncompete agreements with certain “low-wage employees,” generally defined as those earning less than the state’s average weekly wage. That restriction is part of Virginia Code section 40.1-28.7:8, which aimed to prevent employers from restricting the mobility of lower-paid workers.
As of July 1, 2025, Virginia is expanding this restriction. Under a new amendment passed in March 2025, the law will also prohibit post-employment noncompete agreements with all employees who are classified as non-exempt under the federal Fair Labor Standards Act (“FLSA”), regardless of their earnings. This change significantly expands the law’s scope and impacts how employers can utilize non-compete agreements going forward.
If you are wondering which employees you can still bind to a post-employment noncompete, and whether your existing agreements are impacted, read on.
What Changed?
Virginia Code section 40.1-28.7:8 previously prohibited noncompete agreements that applied after the end of employment only for “low-wage employees.” These employees were defined as those earning less than the state’s average weekly wage, which in 2025 is $684 per week, or roughly $35,568 annually. However, under Senate Bill 1218, passed in March 2025, the law now also includes all non-exempt employees under the FLSA, regardless of how much they are paid.
This means any employee who is eligible for overtime pay under federal law is now treated as a “low-wage employee” for purposes of Virginia’s noncompete ban, even if their salary is well above the average wage.
Non-Exempt Status versus Wage Thresholds: A Common Misunderstanding
It is commonly assumed that if someone is paid a good wage on a salaried basis, they are “exempt” from overtime under the FLSA, but that is not necessarily true.
To be exempt under the FLSA, an employee generally must:
- Be paid a salary of at least $684 per week (the current federal threshold),
- Be paid on a salary basis, and
- Perform specific exempt job duties, such as executive, administrative, or professional roles.
Some categories of workers are always considered non-exempt under the FLSA, regardless of how much they earn or what their job duties are. These include manual laborers and blue-collar workers such as construction workers, mechanics, and electricians; first responders like police officers, firefighters, and EMTs; and all hourly employees, except for a narrow exception involving certain highly paid computer professionals. In some cases, public sector workers may also fall into this category based on government rules or union agreements. These employees cannot be classified as exempt and are therefore automatically covered by Virginia’s noncompete ban.
In other words, simply paying on a salary basis and meeting the pay threshold is not enough. If your employee does not meet the duties test, they are still non-exempt and therefore covered by Virginia’s noncompete ban.
What About Independent Contractors?
Virginia’s noncompete ban also applies to some independent contractors. Specifically, a noncompete is prohibited if the independent contractor is:
- Performing services independent of an employment relationship, and
- Paid less than the median hourly wage for all occupations in Virginia, which is currently $25.49 per hour.
If you work with a contractor making less than $25.49 per hour, a post-engagement noncompete agreement is generally no longer enforceable for new engagements. If the contractor earns more, or is paid primarily by commissions or incentives, the law may not apply, but you will need to evaluate their classification and pay structure closely.
Is the Law Retroactive?
No. The amended statute applies only to noncompete agreements entered into, renewed, or modified on or after July 1, 2025.
Existing noncompete agreements signed before July 1, 2025 are not automatically voided. However, if an agreement is renewed or re-signed after July 1, it must comply with the new law.
Employers should be cautious about rolling contracts or offer letters that get refreshed annually, as those may count as new agreements under the law.
What Is Still Allowed?
The law does not ban all types of restrictive covenants. Noncompete agreements are still permitted in Virginia for workers who do not meet the definition of “low-wage” employees under the law—that is, employees who earn above the applicable wage threshold or are classified as exempt under the FLSA. Additionally, employers may continue to enforce reasonable noncompete restrictions during the term of employment, regardless of whether the employee is a “low-wage” worker. Likewise, you can still use nondisclosure or confidentiality agreements to protect trade secrets or proprietary information and enter into reasonable non-solicitation agreements prohibiting solicitation of your customers or employees.
Enforcement and Penalties for Violating Virginia’s Noncompete Law
Virginia’s noncompete law includes significant enforcement provisions that employers need to be aware of. If an employer violates the law by entering into or attempting to enforce a prohibited noncompete agreement, the employer may be subject to a civil penalty of $10,000 for each violation. Additionally, employees who successfully challenge an unlawful noncompete in court are entitled to recover reasonable attorney’s fees, court costs, and fees for expert witnesses from the employer or any other person who tried to enforce the agreement. Given these risks, employers should review and update their agreements promptly to avoid costly penalties and litigation.
What Should Employers Do Now?
- Audit your workforce classifications. Confirm whether employees are properly classified as exempt versus non-exempt under the FLSA. Misclassification of workers as independent contractors instead of employees is a common issue that exposes employers to significant risks, including wage and hour violations, tax penalties, and liability for benefits. Now, with Virginia’s expanded noncompete law, misclassification also carries important noncompete implications.
- Revise employment templates, onboarding materials, and contracts. Ensure offer letters, handbooks, employment contracts, severance agreements, and other documents comply with the new law.
- Post the required notice. Virginia employers must post a summary of the law provided by the Virginia Department of Labor and Industry in the workplace alongside other mandatory notices. Failing to do so may result in fines.
- Consider alternatives. Where noncompete agreements are no longer allowed, consider using well-crafted nondisclosure and non-solicitation agreements to protect legitimate business interests.
Final Takeaway
If you are still using post-employment noncompete agreements with non-exempt employees, even those with high salaries, you will need to stop doing so for new or renewed agreements after July 1, 2025. This new Virginia law represents a significant shift and places new obligations on employers to understand wage thresholds, FLSA classifications, and contract timing.